Text: H.R.1 — 113th Congress (2013-2014)All Information (Except Text)

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Introduced in House (12/10/2014)


113th CONGRESS
2d Session
H. R. 1


To amend the Internal Revenue Code of 1986 to provide for comprehensive tax reform.


IN THE HOUSE OF REPRESENTATIVES

December 10, 2014

Mr. Camp introduced the following bill; which was referred to the Committee on Ways and Means


A BILL

To amend the Internal Revenue Code of 1986 to provide for comprehensive tax reform.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. Short title; etc.

(a) Short title.—This Act may be cited as the “Tax Reform Act of 2014”.

(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 of this Act is as follows:


Sec. 1. Short title; etc.

Sec. 1001. Simplification of individual income tax rates.

Sec. 1002. Deduction for adjusted net capital gain.

Sec. 1003. Conforming amendments related to simplification of individual income tax rates.

Sec. 1101. Standard deduction.

Sec. 1102. Increase and expansion of child tax credit.

Sec. 1103. Modification of earned income tax credit.

Sec. 1104. Repeal of deduction for personal exemptions.

Sec. 1201. American opportunity tax credit.

Sec. 1202. Expansion of Pell Grant exclusion from gross income.

Sec. 1203. Repeal of exclusion of income from United States savings bonds used to pay higher education tuition and fees.

Sec. 1204. Repeal of deduction for interest on education loans.

Sec. 1205. Repeal of deduction for qualified tuition and related expenses.

Sec. 1206. No new contributions to Coverdell education savings accounts.

Sec. 1207. Repeal of exclusion for discharge of student loan indebtedness.

Sec. 1208. Repeal of exclusion for qualified tuition reductions.

Sec. 1209. Repeal of exclusion for education assistance programs.

Sec. 1210. Repeal of exception to 10-percent penalty for higher education expenses.

Sec. 1301. Repeal of dependent care credit.

Sec. 1302. Repeal of credit for adoption expenses.

Sec. 1303. Repeal of credit for nonbusiness energy property.

Sec. 1304. Repeal of credit for residential energy efficient property.

Sec. 1305. Repeal of credit for qualified electric vehicles.

Sec. 1306. Repeal of alternative motor vehicle credit.

Sec. 1307. Repeal of alternative fuel vehicle refueling property credit.

Sec. 1308. Repeal of credit for new qualified plug-in electric drive motor vehicles.

Sec. 1309. Repeal of credit for health insurance costs of eligible individuals.

Sec. 1310. Repeal of first-time homebuyer credit.

Sec. 1401. Exclusion of gain from sale of a principal residence.

Sec. 1402. Mortgage interest.

Sec. 1403. Charitable contributions.

Sec. 1404. Denial of deduction for expenses attributable to the trade or business of being an employee.

Sec. 1405. Repeal of deduction for taxes not paid or accrued in a trade or business.

Sec. 1406. Repeal of deduction for personal casualty losses.

Sec. 1407. Limitation on wagering losses.

Sec. 1408. Repeal of deduction for tax preparation expenses.

Sec. 1409. Repeal of deduction for medical expenses.

Sec. 1410. Repeal of disqualification of expenses for over-the-counter drugs under certain accounts and arrangements.

Sec. 1411. Repeal of deduction for alimony payments and corresponding inclusion in gross income.

Sec. 1412. Repeal of deduction for moving expenses.

Sec. 1413. Termination of deduction and exclusions for contributions to medical savings accounts.

Sec. 1414. Repeal of 2-percent floor on miscellaneous itemized deductions.

Sec. 1415. Repeal of overall limitation on itemized deductions.

Sec. 1416. Deduction for amortizable bond premium allowed in determining adjusted gross income.

Sec. 1417. Repeal of exclusion, etc., for employee achievement awards.

Sec. 1418. Clarification of special rule for certain governmental plans.

Sec. 1419. Limitation on exclusion for employer-provided housing.

Sec. 1420. Fringe benefits.

Sec. 1421. Repeal of exclusion of net unrealized appreciation in employer securities.

Sec. 1422. Consistent basis reporting between estate and person acquiring property from decedent.

Sec. 1501. Modifications of deduction for Social Security taxes in computing net earnings from self-employment.

Sec. 1502. Determination of net earnings from self-employment.

Sec. 1503. Repeal of exemption from FICA taxes for certain foreign workers.

Sec. 1504. Repeal of exemption from FICA taxes for certain students.

Sec. 1505. Override of Treasury guidance providing that certain employer-provided supplemental unemployment benefits are not subject to employment taxes.

Sec. 1506. Certified professional employer organizations.

Sec. 1601. Elimination of income limits on contributions to Roth IRAs.

Sec. 1602. No new contributions to traditional IRAs.

Sec. 1603. Inflation adjustment for Roth IRA contributions.

Sec. 1604. Repeal of special rule permitting recharacterization of Roth IRA contributions as traditional IRA contributions.

Sec. 1605. Repeal of exception to 10-percent penalty for first home purchases.

Sec. 1611. Termination for new SEPs.

Sec. 1612. Termination for new SIMPLE 401(k)s.

Sec. 1613. Rules related to designated Roth contributions.

Sec. 1614. Modifications of required distribution rules for pension plans.

Sec. 1615. Reduction in minimum age for allowable in-service distributions.

Sec. 1616. Modification of rules governing hardship distributions.

Sec. 1617. Extended rollover period for the rollover of plan loan offset amounts in certain cases.

Sec. 1618. Coordination of contribution limitations for 403(b) plans and governmental 457(b) plans.

Sec. 1619. Application of 10-percent early distribution tax to governmental 457 plans.

Sec. 1620. Inflation adjustments for qualified plan benefit and contribution limitations.

Sec. 1621. Inflation adjustments for qualified plan elective deferral limitations.

Sec. 1622. Inflation adjustments for SIMPLE retirement accounts.

Sec. 1623. Inflation adjustments for catch-up contributions for certain employer plans.

Sec. 1624. Inflation adjustments for governmental and tax-exempt organization plans.

Sec. 1701. Indian general welfare benefits.

Sec. 1702. Tribal Advisory Committee.

Sec. 1703. Other relief for Indian tribes.

Sec. 2001. Repeal of alternative minimum tax.

Sec. 3001. 25-percent corporate tax rate.

Sec. 3101. Revision of treatment of contributions to capital.

Sec. 3102. Repeal of deduction for local lobbying expenses.

Sec. 3103. Expenditures for repairs in connection with casualty losses.

Sec. 3104. Reform of accelerated cost recovery system.

Sec. 3105. Repeal of amortization of pollution control facilities.

Sec. 3106. Net operating loss deduction.

Sec. 3107. Circulation expenditures.

Sec. 3108. Amortization of research and experimental expenditures.

Sec. 3109. Repeal of deductions for soil and water conservation expenditures and endangered species recovery expenditures.

Sec. 3110. Amortization of certain advertising expenses.

Sec. 3111. Expensing certain depreciable business assets for small business.

Sec. 3112. Repeal of election to expense certain refineries.

Sec. 3113. Repeal of deduction for energy efficient commercial buildings.

Sec. 3114. Repeal of election to expense advanced mine safety equipment.

Sec. 3115. Repeal of deduction for expenditures by farmers for fertilizer, etc.

Sec. 3116. Repeal of special treatment of certain qualified film and television productions.

Sec. 3117. Repeal of special rules for recoveries of damages of antitrust violations, etc.

Sec. 3118. Treatment of reforestation expenditures.

Sec. 3119. 20-year amortization of goodwill and certain other intangibles.

Sec. 3120. Treatment of environmental remediation costs.

Sec. 3121. Repeal of expensing of qualified disaster expenses.

Sec. 3122. Phaseout and repeal of deduction for income attributable to domestic production activities.

Sec. 3123. Unification of deduction for organizational expenditures.

Sec. 3124. Prevention of arbitrage of deductible interest expense and tax-exempt interest income.

Sec. 3125. Prevention of transfer of certain losses from tax indifferent parties.

Sec. 3126. Entertainment, etc. expenses.

Sec. 3127. Repeal of limitation on corporate acquisition indebtedness.

Sec. 3128. Denial of deductions and credits for expenditures in illegal businesses.

Sec. 3129. Limitation on deduction for FDIC premiums.

Sec. 3130. Repeal of percentage depletion.

Sec. 3131. Repeal of passive activity exception for working interests in oil and gas property.

Sec. 3132. Repeal of special rules for gain or loss on timber, coal, or domestic iron ore.

Sec. 3133. Repeal of like-kind exchanges.

Sec. 3134. Restriction on trade or business property treated as similar or related in service to involuntarily converted property in disaster areas.

Sec. 3135. Repeal of rollover of publicly traded securities gain into specialized small business investment companies.

Sec. 3136. Termination of special rules for gain from certain small business stock.

Sec. 3137. Certain self-created property not treated as a capital asset.

Sec. 3138. Repeal of special rule for sale or exchange of patents.

Sec. 3139. Depreciation recapture on gain from disposition of certain depreciable realty.

Sec. 3140. Common deduction conforming amendments.

Sec. 3201. Repeal of credit for alcohol, etc., used as fuel.

Sec. 3202. Repeal of credit for biodiesel and renewable diesel used as fuel.

Sec. 3203. Research credit modified and made permanent.

Sec. 3204. Low-income housing tax credit.

Sec. 3205. Repeal of enhanced oil recovery credit.

Sec. 3206. Phaseout and repeal of credit for electricity produced from certain renewable resources.

Sec. 3207. Repeal of Indian employment credit.

Sec. 3208. Repeal of credit for portion of employer Social Security taxes paid with respect to employee cash tips.

Sec. 3209. Repeal of credit for clinical testing expenses for certain drugs for rare diseases or conditions.

Sec. 3210. Repeal of credit for small employer pension plan startup costs.

Sec. 3211. Repeal of employer-provided child care credit.

Sec. 3212. Repeal of railroad track maintenance credit.

Sec. 3213. Repeal of credit for production of low sulfur diesel fuel.

Sec. 3214. Repeal of credit for producing oil and gas from marginal wells.

Sec. 3215. Repeal of credit for production from advanced nuclear power facilities.

Sec. 3216. Repeal of credit for producing fuel from a nonconventional source.

Sec. 3217. Repeal of new energy efficient home credit.

Sec. 3218. Repeal of energy efficient appliance credit.

Sec. 3219. Repeal of mine rescue team training credit.

Sec. 3220. Repeal of agricultural chemicals security credit.

Sec. 3221. Repeal of credit for carbon dioxide sequestration.

Sec. 3222. Repeal of credit for employee health insurance expenses of small employers.

Sec. 3223. Repeal of rehabilitation credit.

Sec. 3224. Repeal of energy credit.

Sec. 3225. Repeal of qualifying advanced coal project credit.

Sec. 3226. Repeal of qualifying gasification project credit.

Sec. 3227. Repeal of qualifying advanced energy project credit.

Sec. 3228. Repeal of qualifying therapeutic discovery project credit.

Sec. 3229. Repeal of work opportunity tax credit.

Sec. 3230. Repeal of deduction for certain unused business credits.

Sec. 3301. Limitation on use of cash method of accounting.

Sec. 3302. Rules for determining whether taxpayer has adopted a method of accounting.

Sec. 3303. Certain special rules for taxable year of inclusion.

Sec. 3304. Installment sales.

Sec. 3305. Repeal of special rule for prepaid subscription income.

Sec. 3306. Repeal of special rule for prepaid dues income of certain membership organizations.

Sec. 3307. Repeal of special rule for magazines, paperbacks, and records returned after close of the taxable year.

Sec. 3308. Modification of rules for long-term contracts.

Sec. 3309. Nuclear decommissioning reserve funds.

Sec. 3310. Repeal of last-in, first-out method of inventory.

Sec. 3311. Repeal of lower of cost or market method of inventory.

Sec. 3312. Modification of rules for capitalization and inclusion in inventory costs of certain expenses.

Sec. 3313. Modification of income forecast method.

Sec. 3314. Repeal of averaging of farm income.

Sec. 3315. Treatment of patent or trademark infringement awards.

Sec. 3316. Repeal of redundant rules with respect to carrying charges.

Sec. 3317. Repeal of recurring item exception for spudding of oil or gas wells.

Sec. 3401. Treatment of certain derivatives.

Sec. 3402. Modification of certain rules related to hedges.

Sec. 3411. Current inclusion in income of market discount.

Sec. 3412. Treatment of certain exchanges of debt instruments.

Sec. 3413. Coordination with rules for inclusion not later than for financial accounting purposes.

Sec. 3414. Rules regarding certain government debt.

Sec. 3421. Cost basis of specified securities determined without regard to identification.

Sec. 3422. Wash sales by related parties.

Sec. 3423. Nonrecognition for derivative transactions by a corporation with respect to its stock.

Sec. 3431. Termination of private activity bonds.

Sec. 3432. Termination of credit for interest on certain home mortgages.

Sec. 3433. Repeal of advance refunding bonds.

Sec. 3434. Repeal of tax credit bond rules.

Sec. 3501. Exception to pro rata interest expense disallowance for corporate-owned life insurance restricted to 20-percent owners.

Sec. 3502. Net operating losses of life insurance companies.

Sec. 3503. Repeal of small life insurance company deduction.

Sec. 3504. Computation of life insurance tax reserves.

Sec. 3505. Adjustment for change in computing reserves.

Sec. 3506. Modification of rules for life insurance proration for purposes of determining the dividends received deduction.

Sec. 3507. Repeal of special rule for distributions to shareholders from pre-1984 policyholders surplus account.

Sec. 3508. Modification of proration rules for property and casualty insurance companies.

Sec. 3509. Repeal of special treatment of Blue Cross and Blue Shield organizations, etc.

Sec. 3510. Modification of discounting rules for property and casualty insurance companies.

Sec. 3511. Repeal of special estimated tax payments.

Sec. 3512. Capitalization of certain policy acquisition expenses.

Sec. 3513. Tax reporting for life settlement transactions.

Sec. 3514. Clarification of tax basis of life insurance contracts.

Sec. 3515. Exception to transfer for valuable consideration rules.

Sec. 3601. Reduced recognition period for built-in gains made permanent.

Sec. 3602. Modifications to S corporation passive investment income rules.

Sec. 3603. Expansion of qualifying beneficiaries of an electing small business trust.

Sec. 3604. Charitable contribution deduction for electing small business trusts.

Sec. 3605. Permanent rule regarding basis adjustment to stock of S corporations making charitable contributions of property.

Sec. 3606. Extension of time for making S corporation elections.

Sec. 3607. Relocation of C corporation definition.

Sec. 3611. Repeal of rules relating to guaranteed payments and liquidating distributions.

Sec. 3612. Mandatory adjustments to basis of partnership property in case of transfer of partnership interests.

Sec. 3613. Mandatory adjustments to basis of undistributed partnership property.

Sec. 3614. Corresponding adjustments to basis of properties held by partnership where partnership basis adjusted.

Sec. 3615. Charitable contributions and foreign taxes taken into account in determining limitation on allowance of partner’s share of loss.

Sec. 3616. Revisions related to unrealized receivables and inventory items.

Sec. 3617. Repeal of time limitation on taxing precontribution gain.

Sec. 3618. Partnership interests created by gift.

Sec. 3619. Repeal of technical termination.

Sec. 3620. Publicly traded partnership exception restricted to mining and natural resources partnerships.

Sec. 3621. Ordinary income treatment in the case of partnership interests held in connection with performance of services.

Sec. 3622. Partnership audits and adjustments.

Sec. 3631. Prevention of tax-free spinoffs involving REITs.

Sec. 3632. Extension of period for prevention of REIT election following revocation or termination.

Sec. 3633. Certain short-life property not treated as real property for purposes of REIT provisions.

Sec. 3634. Repeal of special rules for timber held by REITs.

Sec. 3635. Limitation on fixed percentage rent and interest exceptions for REIT income tests.

Sec. 3636. Repeal of preferential dividend rule for publicly offered REITs.

Sec. 3637. Authority for alternative remedies to address certain REIT distribution failures.

Sec. 3638. Limitations on designation of dividends by REITs.

Sec. 3639. Non-REIT earnings and profits required to be distributed by REIT in cash.

Sec. 3640. Debt instruments of publicly offered REITs and mortgages treated as real estate assets.

Sec. 3641. Asset and income test clarification regarding ancillary personal property.

Sec. 3642. Hedging provisions.

Sec. 3643. Modification of REIT earnings and profits calculation to avoid duplicate taxation.

Sec. 3644. Reduction in percentage limitation on assets of REIT which may be taxable REIT subsidiaries.

Sec. 3645. Treatment of certain services provided by taxable REIT subsidiaries.

Sec. 3646. Study relating to taxable REIT subsidiaries.

Sec. 3647. C corporation election to become, or transfer assets to, a RIC or REIT.

Sec. 3648. Interests in RICs and REITs not excluded from definition of United States real property interests.

Sec. 3649. Dividends derived from RICs and REITs ineligible for deduction for United States source portion of dividends from certain foreign corporations.

Sec. 3661. Exclusion of dividends from controlled foreign corporations from the definition of personal holding company income for purposes of the personal holding company rules.

Sec. 3701. Prevention of avoidance of tax through reinsurance with non-taxed affiliates.

Sec. 3702. Taxation of passenger cruise gross income of foreign corporations and nonresident alien individuals.

Sec. 3703. Restriction on insurance business exception to passive foreign investment company rules.

Sec. 3704. Modification of limitation on earnings stripping.

Sec. 3705. Limitation on treaty benefits for certain deductible payments.

Sec. 3801. Nonqualified deferred compensation.

Sec. 3802. Modification of limitation on excessive employee remuneration.

Sec. 3803. Excise tax on excess tax-exempt organization executive compensation.

Sec. 3804. Denial of deduction as research expenditure for stock transferred pursuant to an incentive stock option.

Sec. 3811. Determination of worker classification.

Sec. 3821. Repeal of provisions relating to Empowerment Zones and Enterprise Communities.

Sec. 3822. Repeal of DC Zone provisions.

Sec. 3823. Repeal of provisions relating to renewal communities.

Sec. 3824. Repeal of various short-term regional benefits.

Sec. 4001. Deduction for dividends received by domestic corporations from certain foreign corporations.

Sec. 4002. Limitation on losses with respect to specified 10-percent owned foreign corporations.

Sec. 4003. Treatment of deferred foreign income upon transition to participation exemption system of taxation.

Sec. 4004. Look-thru rule for related controlled foreign corporations made permanent.

Sec. 4101. Repeal of section 902 indirect foreign tax credits; determination of section 960 credit on current year basis.

Sec. 4102. Foreign tax credit limitation applied by allocating only directly allocable deductions to foreign source income.

Sec. 4103. Passive category income expanded to include other mobile income.

Sec. 4104. Source of income from sales of inventory determined solely on basis of production activities.

Sec. 4201. Subpart F income to only include low-taxed foreign income.

Sec. 4202. Foreign base company sales income.

Sec. 4203. Inflation adjustment of de minimis exception for foreign base company income.

Sec. 4204. Active financing exception extended with limitation for low-taxed foreign income.

Sec. 4205. Repeal of inclusion based on withdrawal of previously excluded subpart F income from qualified investment.

Sec. 4211. Foreign intangible income subject to taxation at reduced rate; intangible income treated as subpart F income.

Sec. 4212. Denial of deduction for interest expense of United States shareholders which are members of worldwide affiliated groups with excess domestic indebtedness.

Sec. 5001. Clarification of unrelated business income tax treatment of entities treated as exempt from taxation under section 501(a).

Sec. 5002. Name and logo royalties treated as unrelated business taxable income.

Sec. 5003. Unrelated business taxable income separately computed for each trade or business activity.

Sec. 5004. Exclusion of research income limited to publicly available research.

Sec. 5005. Parity of charitable contribution limitation between trusts and corporations.

Sec. 5006. Increased specific deduction.

Sec. 5007. Repeal of exclusion of gain or loss from disposition of distressed property.

Sec. 5008. Qualified sponsorship payments.

Sec. 5101. Increase in information return penalties.

Sec. 5102. Manager-level accuracy-related penalty on underpayment of unrelated business income tax.

Sec. 5201. Modification of intermediate sanctions.

Sec. 5202. Modification of taxes on self-dealing.

Sec. 5203. Excise tax on failure to distribute within 5 years contribution to donor advised fund.

Sec. 5204. Simplification of excise tax on private foundation investment income.

Sec. 5205. Repeal of exception for private operating foundation failure to distribute income.

Sec. 5206. Excise tax based on investment income of private colleges and universities.

Sec. 5301. Repeal of tax-exempt status for professional sports leagues.

Sec. 5302. Repeal of exemption from tax for certain insurance companies and co-op health insurance issuers.

Sec. 5303. In-State requirement for workmen’s compensation insurance organization.

Sec. 5304. Repeal of Type II and Type III supporting organizations.

Sec. 6001. Organizations required to notify Secretary of intent to operate as 501(c)(4).

Sec. 6002. Declaratory judgments for 501(c)(4) organizations.

Sec. 6003. Restriction on donation reporting for certain 501(c)(4) organizations.

Sec. 6004. Mandatory electronic filing for annual returns of exempt organizations.

Sec. 6005. Duty to ensure that IRS employees are familiar with and act in accord with certain taxpayer rights.

Sec. 6006. Termination of employment of IRS employees for taking official actions for political purposes.

Sec. 6007. Release of information regarding the status of certain investigations.

Sec. 6008. Review of IRS examination selection procedures.

Sec. 6009. IRS employees prohibited from using personal email accounts for official business.

Sec. 6010. Moratorium on IRS conferences.

Sec. 6011. Applicable standard for determinations of whether an organization is operated exclusively for the promotion of social welfare.

Sec. 6101. Extension of IRS authority to require truncated Social Security numbers on Form W–2.

Sec. 6102. Free electronic filing.

Sec. 6103. Pre-populated returns prohibited.

Sec. 6104. Form 1040SR for seniors.

Sec. 6105. Increased refund and credit threshold for Joint Committee on Taxation review of C corporation return.

Sec. 6201. Due dates for returns of partnerships, S corporations, and C corporations.

Sec. 6202. Modification of due dates by regulation.

Sec. 6203. Corporations permitted statutory automatic 6-month extension of income tax returns.

Sec. 6301. Penalty for failure to file.

Sec. 6302. Penalty for failure to file correct information returns and provide payee statements.

Sec. 6303. Clarification of 6-year statute of limitations in case of overstatement of basis.

Sec. 6304. Reform of rules related to qualified tax collection contracts.

Sec. 6305. 100 percent continuous levy on payments to Medicare providers and suppliers.

Sec. 6306. Treatment of refundable credits for purposes of certain penalties.

Sec. 7001. Repeal of medical device excise tax.

Sec. 7002. Modifications relating to oil spill liability trust fund.

Sec. 7003. Modification relating to inland waterways trust fund financing rate.

Sec. 7004. Excise tax on systemically important financial institutions.

Sec. 7005. Clarification of orphan drug exception to annual fee on branded prescription pharmaceutical manufacturers and importers.

Sec. 8001. Repeal of Puerto Rico economic activity credit.

Sec. 8002. Repeal of making work pay credit.

Sec. 8003. General business credit.

Sec. 8004. Environmental tax.

Sec. 8005. Annuities; certain proceeds of endowment and life insurance contracts.

Sec. 8006. Unemployment compensation.

Sec. 8007. Flexible spending arrangements.

Sec. 8008. Certain combat zone compensation of members of the armed forces.

Sec. 8009. Qualified group legal services plans.

Sec. 8010. Certain reduced uniformed services retirement pay.

Sec. 8011. Great plains conservation program.

Sec. 8012. State legislators’ travel expenses away from home.

Sec. 8013. Treble damage payments under the antitrust law.

Sec. 8014. Phase-in of limitation on investment interest.

Sec. 8015. Charitable, etc., contributions and gifts.

Sec. 8016. Amortizable bond premium.

Sec. 8017. Repeal of deduction for clean-fuel vehicles and certain refueling property.

Sec. 8018. Repeal of deduction for capital costs incurred in complying with environmental protection agency sulfur regulations.

Sec. 8019. Activities not engaged in for profit.

Sec. 8020. Dividends received on certain preferred stock; and dividends paid on certain preferred stock of public utilities.

Sec. 8021. Acquisitions made to evade or avoid income tax.

Sec. 8022. Distributions of property.

Sec. 8023. Effect on earnings and profits.

Sec. 8024. Basis to corporations.

Sec. 8025. Tax credit employee stock ownership plans.

Sec. 8026. Employee stock purchase plans.

Sec. 8027. Transition rules.

Sec. 8028. Limitation on deductions for certain farming.

Sec. 8029. Deductions limited to amount at risk.

Sec. 8030. Passive activity losses and credits limited.

Sec. 8031. Adjustments required by changes in method of accounting.

Sec. 8032. Exemption from tax on corporations, certain trusts, etc.

Sec. 8033. Requirements for exemption.

Sec. 8034. Repeal of special treatment for religious broadcasting company.

Sec. 8035. Repeal of exclusion of gain or loss from disposition of brownfield property.

Sec. 8036. Accumulated taxable income.

Sec. 8037. Certain provisions related to depletion.

Sec. 8038. Amounts received by surviving annuitant under joint and survivor annuity contract.

Sec. 8039. Income taxes of members of armed forces on death.

Sec. 8040. Special rules for computing reserves.

Sec. 8041. Insurance company taxable income.

Sec. 8042. Capitalization of certain policy acquisition expenses.

Sec. 8043. Repeal of provision on expatriation to avoid tax.

Sec. 8044. Repeal of certain transition rules on income from sources without United States.

Sec. 8045. Repeal of Puerto Rico and possession tax credit.

Sec. 8046. Basis of property acquired from decedent.

Sec. 8047. Property on which lessee has made improvements.

Sec. 8048. Involuntary conversion.

Sec. 8049. Property acquired during affiliation.

Sec. 8050. Repeal of special holding period rules for certain commodity futures transactions.

Sec. 8051. Holding period of property.

Sec. 8052. Property used in the trade or business and involuntary conversions.

Sec. 8053. Sale of patents.

Sec. 8054. Gain from disposition of farmland.

Sec. 8055. Transition rules related to the treatment of amounts received on retirement or sale or exchange of debt instruments.

Sec. 8056. Certain rules with respect to debt instruments issued before July 2, 1982.

Sec. 8057. Certain rules with respect to stripped bonds purchased before July 2, 1982.

Sec. 8058. Amount and method of adjustment.

Sec. 8059. Old-age, survivors, and disability insurance.

Sec. 8060. Hospital insurance.

Sec. 8061. Ministers, members of religious orders, and christian science practitioners.

Sec. 8062. Affiliated group defined.

Sec. 8063. Credit for state death taxes.

Sec. 8064. Family-owned business interest.

Sec. 8065. Property within the united states.

Sec. 8066. Repeal of deadwood provisions relating to employment taxes.

Sec. 8067. Luxury passenger automobiles.

Sec. 8068. Transportation by air.

Sec. 8069. Taxes on failure to distribute income.

Sec. 8070. Taxes on taxable expenditures.

Sec. 8071. Definitions and special rules.

Sec. 8072. Returns.

Sec. 8073. Information returns.

Sec. 8074. Abatements.

Sec. 8075. Failure by corporation to pay estimated income tax.

Sec. 8076. Repeal of 2008 recovery rebates.

Sec. 8077. Repeal of advance payment of portion of increased child credit for 2003.

Sec. 8078. Repeal of provisions related to COBRA premium assistance.

Sec. 8079. Retirement.

Sec. 8080. Annuities to surviving spouses and dependent children of judges.

Sec. 8081. Merchant marine capital construction funds.

Sec. 8082. Valuation tables.

Sec. 8083. Definition of employee.

Sec. 8084. Effective date.

Sec. 8101. Conforming amendments related to multiple sections.

SEC. 1001. Simplification of individual income tax rates.

(a) In general.—Section 1 is amended to read as follows:

“SEC. 1. Tax imposed.

“(a) In general.—There is hereby imposed on the income of every individual a tax equal to the sum of—

“(1) 10 PERCENT BRACKET.—10 percent of so much of the taxable income as does not exceed the 25-percent bracket threshold amount,

“(2) 25 PERCENT BRACKET.—25 percent of so much of the taxable income as exceeds the 25-percent bracket threshold amount, plus

“(3) 35 PERCENT BRACKET.—10 percent of so much of the modified adjusted gross income (as defined in section 2) as exceeds the 35-percent bracket threshold amount.

“(b) Bracket threshold amounts.—For purposes of this section—

“(1) 25-PERCENT BRACKET THRESHOLD AMOUNT.—The term ‘25-percent bracket threshold amount’ means—

“(A) in the case of a joint return or surviving spouse, $71,200,

“(B) in the case of any other individual (other than an estate or trust), one-half of the dollar amount in effect under subparagraph (A), and

“(C) in the case of an estate or trust, zero.

“(2) 35-PERCENT BRACKET THRESHOLD AMOUNT.—The term ‘35-percent bracket threshold amount’ means—

“(A) in the case of a joint return or surviving spouse, $450,000,

“(B) in the case of any other individual (other than an estate or trust), $400,000, and

“(C) in the case of an estate or trust, $12,000.

“(c) Inflation adjustment.—

“(1) IN GENERAL.—In the case of any taxable year beginning after 2014, each dollar amount in subsections (b)(1)(A), (b)(2)(A), (b)(2)(B), (b)(2)(C), (e)(3)(A), and (e)(3)(B) shall be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) the cost-of-living adjustment determined under this subsection for the calendar year in which the taxable year begins.

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.

“(2) COST-OF-LIVING ADJUSTMENT.—For purposes of this subsection—

“(A) IN GENERAL.—The cost-of-living adjustment for any calendar year is the percentage (if any) by which—

“(i) the C-CPI-U for the preceding calendar year, exceeds

“(ii) the normalized CPI for calendar year 2012.

“(B) SPECIAL RULE FOR ADJUSTMENTS WITH A BASE YEAR AFTER 2012.—For purposes of any provision which provides for the substitution of a year after 2012 for ‘2012’ in subparagraph (A)(ii), subparagraph (A) shall be applied by substituting ‘C-CPI-U’ for ‘normalized CPI’ in clause (ii).

“(3) NORMALIZED CPI.—For purposes of this subsection, the normalized CPI for any calendar year is the product of—

“(A) the CPI for such calendar year, multiplied by

“(B) the C-CPI-U transition multiple.

“(4) C-CPI-U TRANSITION MULTIPLE.—For purposes of this subsection, the term ‘C-CPI-U transition multiple’ means the amount obtained by dividing—

“(A) the C-CPI-U for calendar year 2013, by

“(B) the CPI for calendar year 2013.

“(5) C-CPI-U.—For purposes of this subsection—

“(A) IN GENERAL.—The term ‘C-CPI-U’ means the Chained Consumer Price Index for All Urban Consumers (as published by the Bureau of Labor Statistics of the Department of Labor). The values of the Chained Consumer Price Index for All Urban Consumers taken into account for purposes of determining the cost-of-living adjustment for any calendar year under this subsection shall be the latest values so published as of the date on which such Bureau publishes the initial value of the Chained Consumer Price Index for All Urban Consumers for the month of August for the preceding calendar year.

“(B) DETERMINATION FOR CALENDAR YEAR.—The C-CPI-U for any calendar year is the average of the C-CPI-U as of the close of the 12-month period ending on August 31 of such calendar year.

“(6) CPI.—For purposes of this subsection—

“(A) IN GENERAL.—The term ‘Consumer Price Index’ 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.

“(B) DETERMINATION FOR CALENDAR YEAR.—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.

“(d) Special rules for certain children with unearned income.—

“(1) IN GENERAL.—In the case of any child to whom this subsection applies for any taxable year—

“(A) 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

“(B) the 35-percent bracket threshold amount shall not be more than the sum of—

“(i) the taxable income of such child for the taxable year reduced by the net unearned income of such child, plus

“(ii) the dollar amount in effect under subsection (b)(2)(C) for the taxable year.

“(2) CHILD TO WHOM SUBSECTION APPLIES.—This subsection shall apply to any child for any taxable year if—

“(A) such child—

“(i) has not attained age 18 before the close of the taxable year, or

“(ii) has attained age 18 before the close of the taxable year and is described in paragraph (3),

“(B) either parent of such child is alive at the close of the taxable year, and

“(C) such child does not file a joint return for the taxable year.

“(3) CERTAIN CHILDREN WHOSE EARNED INCOME DOES NOT EXCEED ONE-HALF OF INDIVIDUAL’S SUPPORT.—A child is described in this paragraph if—

“(A) such child—

“(i) has not attained age 19 before the close of the taxable year, or

“(ii) is a student (within the meaning of section 7705(f)(2)) who has not attained age 24 before the close of the taxable year, and

“(B) 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 7705(c)(1)(D) after the application of section 7705(f)(5) (without regard to subparagraph (A) thereof)) for such taxable year.

“(4) NET UNEARNED INCOME.—For purposes of this subsection—

“(A) IN GENERAL.—The term ‘net unearned income’ means the excess of—

“(i) 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

“(ii) the sum of—

“(I) the amount in effect for the taxable year under section 63(c)(4)(A) (relating to limitation on standard deduction in the case of certain dependents), plus

“(II) 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).

“(B) LIMITATION BASED ON TAXABLE INCOME.—The amount of the net unearned income for any taxable year shall not exceed the individual’s taxable income for such taxable year.

“(e) Phaseout of 10-Percent rate.—

“(1) IN GENERAL.—The amount of tax imposed by this section (determined without regard to this subsection) shall be increased by 5 percent of the excess (if any) of—

“(A) modified adjusted gross income, over

“(B) the applicable dollar amount.

“(2) LIMITATION.—The increase determined under paragraph (1) with respect to any taxpayer for any taxable year shall not exceed 15 percent of the lesser of—

“(A) the taxpayer’s taxable income for such taxable year, or

“(B) the 25-percent bracket threshold amount in effect with respect to the taxpayer for such taxable year.

“(3) APPLICABLE DOLLAR AMOUNT.—For purposes of this subsection, the term ‘applicable dollar amount’ means—

“(A) in the case of a joint return or a surviving spouse, $300,000,

“(B) in the case of any other individual, $250,000.

“(4) ESTATES AND TRUSTS.—Paragraph (1) shall not apply in the case of an estate or trust.

“(f) Determination of highest rate.—For purposes of any provision of law which refers to the highest rate of tax specified in this section (or any subsection of this section), such highest rate shall be treated as being 35 percent.”.

(b) Modified adjusted gross income.—Section 2 is amended by striking subsection (b), by redesignating subsections (c), (d), and (e), as subsections (d), (e), and (f), respectively, and by inserting after subsection (a) the following new subsections:

“(b) Modified adjusted gross income.—For purposes of section 1—

“(1) IN GENERAL.—The term ‘modified adjusted gross income’ means adjusted gross income—

“(A) increased by—

“(i) any amount excluded from gross income under sections 911, 931, and 933,

“(ii) the excess (if any) of—

“(I) amounts of interest received or accrued by the taxpayer during the taxable year which are exempt from tax, over

“(II) amounts disallowed as a deduction by reason of section 163(d)(1)(A) or 171(a)(2),

“(iii) any exclusion from gross income with respect to the cost described in section 6051(a)(14) (without regard to subparagraphs (A) and (B) thereof),

“(iv) any deduction allowable under section 162(l) (relating to special rules for health insurance costs of self-employed individuals),

“(v) any annual addition (as defined in section 415(c)(2)) to a defined contribution plan which is not includible in, or which is deductible from, the gross income of the individual for the taxable year,

“(vi) any deduction allowable under section 223, and

“(vii) the excess (if any) of—

“(I) the social security benefits of the individual for the taxable year (as defined in section 86(d)), over

“(II) the amount included in the gross income of such individual for such taxable year under section 86, and

“(B) decreased by—

“(i) any deduction allowed under section 170 (and in the case of an estate or trust, any deduction allowed under section 642(c)), and

“(ii) qualified domestic manufacturing income.

“(2) DETERMINATION OF ADJUSTED GROSS INCOME IN CASE OF ESTATES AND TRUSTS.—For purposes of this subsection, the adjusted gross income of an estate or trust shall be computed in the same manner as in the case of an individual, except that—

“(A) the deductions for costs which are paid or incurred in connection with the administration of the estate or trust and which would not have been incurred if the property were not held in such trust or estate, and

“(B) the deductions allowable under sections 642(b), 651, and 661,

shall be treated as allowable in arriving at adjusted gross income. Under regulations, appropriate adjustments shall be made in the application of part I of subchapter J of this chapter to take into account the application of this paragraph.

“(c) Qualified domestic manufacturing income.—

“(1) IN GENERAL.—For purposes of subsection (b), the term ‘qualified domestic manufacturing income’ for any taxable year means an amount equal to the excess (if any) of—

“(A) the taxpayer’s domestic manufacturing gross receipts for such taxable year, over

“(B) the sum of—

“(i) the cost of goods sold that are allocable to such receipts, and

“(ii) other expenses, losses, or deductions, which are properly allocable to such receipts.

“(2) ALLOCATION METHOD.—The Secretary shall prescribe rules for the proper allocation of items described in paragraph (1) for purposes of determining qualified domestic manufacturing income. Such rules shall provide for the proper allocation of items whether or not such items are directly allocable to domestic manufacturing gross receipts.

“(3) SPECIAL RULES FOR DETERMINING COSTS.—

“(A) IN GENERAL.—For purposes of determining costs under clause (i) of paragraph (1)(B), any item or service brought into the United States shall be treated as acquired by purchase, and its cost shall be treated as not less than its value immediately after it entered the United States. A similar rule shall apply in determining the adjusted basis of leased or rented property where the lease or rental gives rise to domestic manufacturing gross receipts.

“(B) EXPORTS FOR FURTHER MANUFACTURE.—In the case of any property described in subparagraph (A) that had been exported by the taxpayer for further manufacture, the increase in cost or adjusted basis under subparagraph (A) shall not exceed the difference between the value of the property when exported and the value of the property when brought back into the United States after the further manufacture.

“(4) DOMESTIC MANUFACTURING GROSS RECEIPTS.—For purposes of this subsection—

“(A) IN GENERAL.—The term ‘domestic manufacturing gross receipts’ means the gross receipts of the taxpayer which are derived from—

“(i) any lease, rental, license, sale, exchange, or other disposition of tangible personal property which was manufactured, produced, grown, or extracted by the taxpayer in whole or in significant part within the United States, or

“(ii) in the case of a taxpayer engaged in the active conduct of a construction trade or business, construction of real property performed in the United States by the taxpayer in the ordinary course of such trade or business if such real property is placed in service after December 31, 2014.

“(B) EXCEPTIONS.—Such term shall not include gross receipts of the taxpayer which are derived from—

“(i) the sale of food and beverages prepared by the taxpayer at a retail establishment,

“(ii) the transmission or distribution of electricity, natural gas, or potable water, and

“(iii) the lease, rental, license, sale, exchange, or other disposition of land.

“(C) SPECIAL RULE FOR CERTAIN GOVERNMENT CONTRACTS.—Gross receipts derived from the manufacture or production of any property described in subparagraph (A)(i) shall be treated as meeting the requirements of subparagraph (A)(i) if—

“(i) such property is manufactured or produced by the taxpayer pursuant to a contract with the Federal Government, and

“(ii) the Federal Acquisition Regulation requires that title or risk of loss with respect to such property be transferred to the Federal Government before the manufacture or production of such property is complete.

“(D) TREATMENT OF ACTIVITIES IN PUERTO RICO.—In the case of any taxpayer with gross receipts for any taxable year from sources within the Commonwealth of Puerto Rico, if all of such receipts are taxable under section 1 for such taxable year, then this paragraph shall be applied by treating each reference in subparagraph (A) to the United States as including the Commonwealth of Puerto Rico.

“(E) TANGIBLE PERSONAL PROPERTY.—The term ‘tangible personal property’ shall not include computer software or any property described in paragraph (3) or (4) of section 168(f).

“(F) RELATED PERSONS.—

“(i) IN GENERAL.—The term ‘domestic manufacturing gross receipts’ shall not include any gross receipts of the taxpayer derived from property leased, licensed, or rented by the taxpayer for use by any related person.

“(ii) RELATED PERSON.—For purposes of clause (i), a person shall be treated as related to another person if such persons are treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414, except that determinations under subsections (a) and (b) of section 52 shall be made without regard to section 1563(b).

“(5) CERTAIN INCOME NOT QUALIFIED.—

“(A) NET EARNINGS FROM SELF EMPLOYMENT.—Domestic manufacturing gross receipts shall not include any amount which is properly allocable to the taxpayer’s net earnings from self employment (determined after any reduction provided under section 1402(m)).

“(B) CERTAIN ACCOUNTING METHOD ADJUSTMENTS.—Domestic manufacturing gross receipts shall not include any amount attributable to—

“(i) a qualified change in method of accounting (as defined in section 3301(d)(2) of the Tax Reform Act of 2014), or

“(ii) any other change in method of accounting which is required by the amendments made by such Act.

“(6) APPLICATION OF SECTION TO PASS-THROUGH ENTITIES.—

“(A) PARTNERSHIPS AND S CORPORATIONS.—Except as provided in subparagraph (B), in the case of a partnership or S corporation, each partner or shareholder shall take into account such person’s allocable share of each item described in subparagraph (A) or (B) of paragraph (1) (determined without regard to whether the items described in such subparagraph (A) exceed the items described in such subparagraph (B)).

“(B) PUBLICLY TRADED PARTNERSHIPS.—In the case of a publicly traded partnership described in section 7704(c), each partner shall not take into account any allocable share of any item referred to in subparagraph (A).

“(C) TRUSTS AND ESTATES.—In the case of a trust or estate, the items referred to in subparagraph (A) (as determined therein) shall be apportioned between the beneficiaries and the fiduciary (and among the beneficiaries) under regulations prescribed by the Secretary.

“(7) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance—

“(A) which prevent more than 1 taxpayer from taking into account the same qualified domestic manufacturing income, and

“(B) which require or restrict the allocation of items under paragraph (6) and require such reporting for purposes of carrying out such paragraph as the Secretary determines appropriate.

“(8) PHASE-IN OF EXCLUSION.—In the case of any taxable year beginning before January 1, 2017, the term ‘qualified domestic manufacturing income’ shall be an amount equal to the product of the qualified domestic manufacturing income determined without regard to this paragraph, multiplied by—

“(A) in the case of any taxable year beginning in 2015, 33 percent, and

“(B) in the case of any taxable year beginning in 2016, 67 percent.”.

(c) Application of section 15.—

(1) IN GENERAL.—Subsection (a) of section 15 is amended by striking “this chapter” and inserting “section 11”.

(2) CONFORMING AMENDMENTS.—

(A) Section 15 is amended by striking subsections (d) and (f) and by redesignating subsection (e) as subsection (d).

(B) Section 15(d), as redesignated by subparagraph (A), is amended by striking “section 1 or 11(b)” and inserting “section 11(b)”.

(C) Subchapter A of chapter 1 is amended—

(i) by redesignating section 12 as section 13,

(ii) by redesignating section 15 (as amended by this subsection) as section 12 and moving such section from part III of such subchapter to after section 11 in part II of such subchapter,

(iii) by striking part III, and

(iv) by amending the table of sections for part II of such subchapter by redesignating the item relating to section 12 as an item relating to section 13 and by inserting after the item relating to section 11 the following new item:


“Sec. 12. Effect of changes.”.

(D) Section 6013(c) is amended by striking “sections 15, 443, and 7851(a)(1)(A)” and inserting “sections 443 and 7851(a)(1)(A)”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1002. Deduction for adjusted net capital gain.

(a) In general.—Part VI of subchapter B of chapter 1, as amended by section 3105, is amended by inserting after section 168 the following new section:

“SEC. 169. Adjusted net capital gain.

“(a) In general.—If for any taxable year a taxpayer other than a corporation has an adjusted net capital gain, 40 percent of the amount of the adjusted net capital gain shall be allowed as a deduction from gross income.

“(b) Adjusted net capital gain.—For purposes of this section, the term ‘adjusted net capital gain’ means the sum of—

“(1) net capital gain reduced (but not below zero) by the net collectibles gain, plus

“(2) qualified dividend income.

“(c) Net capital gain reduced by amounts taken into account as investment income.—For purposes of this section, the net capital gain for any taxable year shall be reduced (but not below zero) by the amount which the taxpayer takes into account as investment income under section 163(d)(4)(B)(iii).

“(d) Net collectibles gain.—For purposes of this section—

“(1) IN GENERAL.—The term ‘net collectibles gain’ means the excess (if any) of—

“(A) collectibles gain, over

“(B) collectibles loss.

“(2) COLLECTIBLES GAIN AND LOSS.—The terms ‘collectibles gain’ and ‘collectibles loss’ mean gain or loss (respectively) from the sale or exchange of a collectible (as defined in section 408(m) without regard to paragraph (3) thereof) which is a capital asset held for more than 1 year but only to the extent such gain is taken into account in computing gross income and such loss is taken into account in computing taxable income.

“(3) PARTNERSHIPS, ETC.—For purposes of paragraph (2), any gain from the sale of an interest in a partnership, S corporation, or trust which is attributable to unrealized appreciation in the value of collectibles shall be treated as gain from the sale or exchange of a collectible. Rules similar to the rules of section 751 shall apply for purposes of the preceding sentence.

“(e) Qualified dividend income.—For purposes of this section—

“(1) IN GENERAL.—The term ‘qualified dividend income’ means dividends received during the taxable year from—

“(A) domestic corporations, and

“(B) qualified foreign corporations.

“(2) CERTAIN DIVIDENDS EXCLUDED.—Such term shall not include—

“(A) any dividend from a corporation which for the taxable year of the corporation in which the distribution is made, or the preceding taxable year, is a corporation exempt from tax under section 501 or 521,

“(B) any amount allowed as a deduction under section 591 (relating to deduction for dividends paid by mutual savings banks, etc.), and

“(C) any dividend described in section 404(k).

“(3) COORDINATION WITH SECTION 246(c).—Such term shall not include any dividend on any share of stock—

“(A) with respect to which the holding period requirements of section 246(c) are not met (determined without regard to paragraph (5) of section 246(c) and by substituting in section 246(c) ‘60 days’ for ‘45 days’ each place it appears and by substituting ‘121-day period’ for ‘91-day period’), or

“(B) to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.

“(4) QUALIFIED FOREIGN CORPORATIONS.—

“(A) IN GENERAL.—Except as otherwise provided in this subparagraph, the term ‘qualified foreign corporation’ means any foreign corporation if—

“(i) such corporation is incorporated in a possession of the United States, or

“(ii) such corporation is eligible as a qualified resident for all of the benefits provided under a comprehensive income tax treaty with the United States which the Secretary determines is satisfactory for purposes of this paragraph and which includes an exchange of information program.

“(B) DIVIDENDS ON STOCK READILY TRADABLE ON UNITED STATES SECURITIES MARKET.—A foreign corporation not otherwise treated as a qualified foreign corporation under subparagraph (A) shall be so treated with respect to any dividend paid by such corporation if the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States.

“(C) EXCLUSION OF DIVIDENDS OF CERTAIN FOREIGN CORPORATIONS.—The term ‘qualified foreign corporation’ shall not include any foreign corporation which for the taxable year of the corporation in which the dividend was paid, or the preceding taxable year, is a passive foreign investment company (as defined in section 1297).

“(5) TREATMENT OF DIVIDENDS FROM REGULATED INVESTMENT COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.—A dividend received from a regulated investment company or a real estate investment trust shall be subject to the limitations prescribed in sections 854 and 857.”.

(b) Deduction allowed whether or not individual itemizes deductions.—Section 62(a) is amended by inserting after paragraph (7) the following new paragraph:

“(8) ADJUSTED NET CAPITAL GAIN.—The deduction allowed by section 169.”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1003. Conforming amendments related to simplification of individual income tax rates.

(a) Amendments related to modification of inflation adjustment.—

(1) Section 25B(b)(3)(B) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2005’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2005’ for ‘calendar year 2012’ in clause (ii) thereof”.

(2) Subclause (II) of section 36B(b)(3)(A)(ii) is amended by striking “consumer price index” and inserting “C-CPI-U (as defined in section 1(c))”.

(3) Section 41(e)(5)(C) is amended to read as follows:

“(C) COST-OF-LIVING ADJUSTMENT DEFINED.—

“(i) IN GENERAL.—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 ‘calendar year 1987’ for ‘calendar year 2012’ in clause (ii) thereof.

“(ii) SPECIAL RULE WHERE BASE PERIOD ENDS IN A CALENDAR YEAR OTHER THAN 1983 OR 1984.—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.”.

(4) Section 125(i)(2) is amended—

(A) by striking “section 1(f)(3) for the calendar year in which the taxable year begins by substituting ‘calendar year 2012’ for ‘calendar year 1992’ in subparagraph (B) thereof” in subparagraph (B) and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins”, and

(B) by striking “$50” both places it appears in the last sentence and inserting “$100”.

(5) Section 137(f) is amended—

(A) by striking “section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2001’ for ‘calendar year 1992’ in subparagraph (B) thereof” in paragraph (2) and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2001’ for ‘calendar year 2012’ in clause (ii) thereof”, and

(B) in the last sentence thereof—

(i) by striking “$10” the first place it appears and inserting “$100”, and

(ii) by striking “nearest multiple of $10” and inserting “next lowest multiple of $100”.

(6) Section 162(o)(3) is amended by inserting “as in effect before enactment of the Tax Reform Act of 2014” after “section 1(f)(5)”.

(7) Section 220(g)(2) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 1997’ for ‘calendar year 2012’ in clause (ii) thereof”.

(8) Section 223(g)(1) is amended by striking all that follows subparagraph (A) and inserting the following:

“(B) the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined—

“(i) by substituting for ‘calendar year 2012’ in clause (ii) thereof—

“(I) except as provided in clause (ii), ‘calendar year 1997’, and

“(II) in the case of each dollar amount in subsection (c)(2)(A), ‘calendar year 2003’, and

“(ii) by substituting ‘March 31’ for ‘August 31’ in paragraphs (5)(B) and (6)(B) of section 1(c).

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.”.

(9) Section 430(c)(7)(D)(vii)(II) is amended by striking “section 1(f)(3) for the calendar year, determined by substituting ‘calendar year 2009’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year, determined by substituting ‘calendar year 2009’ for ‘calendar year 2012’ in clause (ii) thereof”.

(10) Section 512(d)(2)(B) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins, by substituting ‘calendar year 1994’ for ‘calendar year 1992’ in subparagraph (B) thereof”and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 1994’ for ‘calendar year 2012’ in clause (ii) thereof”.

(11) Section 513(h)(2)(C)(ii) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins by substituting ‘calendar year 1987’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 1987’ for ‘calendar year 2012’ in clause (ii) thereof”.

(12) Section 877A(a)(3)(B)(i)(II) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins, by substituting ‘calendar year 2007’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 2012’ in clause (ii) thereof”.

(13) Section 911(b)(2)(D)(ii)(II) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘2004’ for ‘1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2004’ for ‘calendar year 2012’ in clause (ii) thereof”.

(14) Section 1274A(d)(2) is amended to read as follows:

“(2) INFLATION ADJUSTMENT.—

“(A) IN GENERAL.—In the case of any debt instrument arising out of a sale or exchange during any calendar year after 2014, each adjusted dollar amount shall be increased by an amount equal to—

“(i) such adjusted dollar amount, multiplied by

“(ii) the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 2013’ for ‘calendar year 2012’ in clause (ii) thereof.

“(B) ADJUSTED DOLLAR AMOUNTS.—For purposes of this paragraph, the term ‘adjusted dollar amount’ means the dollar amounts in subsections (b) and (c), in each case as in effect for calendar year 2014.

“(C) ROUNDING.—Any increase under subparagraph (A) shall be rounded to the nearest multiple of $100.”.

(15) Section 2010(c)(3)(B)(ii) is amended by striking “section 1(f)(3) for such calendar year by substituting ‘calendar year 2010’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 2010’ for ‘calendar year 2012’ in clause (ii) thereof”.

(16) Section 2032A(a)(3)(B) is amended by striking “section 1(f)(3) for such calendar year by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 1997’ for ‘calendar year 2012’ in clause (ii) thereof”.

(17) Section 2503(b)(2)(B) is amended by striking “section 1(f)(3) for such calendar year by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year, determined by substituting ‘calendar year 1997’ for ‘calendar year 2012’ in clause (ii) thereof”.

(18) Section 4161(b)(2)(C)(i)(II) is amended by striking “section 1(f)(3) for such calendar year, determined by substituting ‘2004’ for ‘1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 2004’ for ‘calendar year 2012’ in clause (ii) thereof”.

(19) Section 4261(e)(4)(A)(ii) is amended by striking “section 1(f)(3) for such calendar year by substituting the year before the last nonindexed year for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting the year before the last nonindexed year for ‘calendar year 2012’ in clause (ii) thereof”.

(20) Section 4980I(b)(3)(C)(v)(II) is amended

(A) by striking “section 1(f)(3)” and inserting “section 1(c)(2)(A)”,

(B) by striking “subparagraph (B)” and inserting “clause (ii)”, and

(C) by striking “1992” and inserting “2012”.

(21) Section 5000A(c)(3)(D)(ii) is amended—

(A) by striking “section 1(f)(3)” and inserting “section 1(c)(2)(A)”,

(B) by striking “subparagraph (B)” and inserting “clause (ii)”, and

(C) by striking “1992” and inserting “2012”.

(22) Section 6039F(d) is amended by striking “section 1(f)(3), except that subparagraph (B) thereof” and inserting “section 1(c)(2)(A), except that clause (ii) thereof ”.

(23) Section 6323(i)(4)(B) is amended by striking “section 1(f)(3) for the calendar year, determined by substituting ‘calendar year 1996’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year, determined by substituting ‘calendar year 1996’ for ‘calendar year 2012’ in clause (ii) thereof”.

(24) Section 6334(g)(1)(B) is amended by striking “section 1(f)(3) for such calendar year, by substituting ‘calendar year 1998’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 1999’ for ‘calendar year 2012’ in clause (ii) thereof”.

(25) Section 6721(f)(1) is amended—

(A) by striking “section 1(f)(3)” and inserting “section 1(c)(2)(A)”,

(B) by striking “subparagraph (B)” and inserting “clause (ii)”, and

(C) by striking “1992” and inserting “2012”.

(26) Section 6722(f)(1) is amended—

(A) by striking “section 1(f)(3)” and inserting “section 1(c)(2)(A)”,

(B) by striking “subparagraph (B)” and inserting “clause (ii)”, and

(C) by striking “1992” and inserting “2012”.

(27) Section 7430(c)(1) is amended by striking “section 1(f)(3) for such calendar year, by substituting ‘calendar year 1995’ for ‘calendar year 1992’ in subparagraph (B) thereof” in the flush text at the end and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 1995’ for ‘calendar year 2012’ in clause (ii) thereof”.

(28) Section 7872(g)(5) is amended to read as follows:

“(5) INFLATION ADJUSTMENT.—

“(A) IN GENERAL.—In the case of any loan made during any calendar year after 2014 to which paragraph (1) applies, the adjusted dollar amount shall be increased by an amount equal to—

“(i) such adjusted dollar amount, multiplied by

“(ii) the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 2013’ for ‘calendar year 2012’ in clause (ii) thereof.

“(B) ADJUSTED DOLLAR AMOUNT.—For purposes of this paragraph, the term ‘adjusted dollar amount’ means the dollar amount in paragraph (2) as in effect for calendar year 2014.

“(C) ROUNDING.—Any increase under subparagraph (A) shall be rounded to the nearest multiple of $100.”.

(b) Amendments related to deduction for adjusted net capital gain.—

(1) Section 163(d)(4)(B) is amended by striking “section 1(h)(11)(B)” and inserting “section 169(e)”.

(2) Section 172(d)(2)(B) is amended by inserting “the deduction allowable under section 169 and” before “the exclusion”.

(3) Section 301(f)(4) is amended by striking “section 1(h)(11)” and inserting “section 169(e)”.

(4) Section 306(a)(1)(D) is amended by striking “section 1(h)(11)” and inserting “section 169(e)”.

(5) The last sentence of section 453A(c)(3) is amended by striking “capital gain” and all that follows and inserting “capital gain, the deduction under section 169 shall be taken into account.”.

(6) Sections 531 and 541 are each amended by striking “20 percent” and inserting “21 percent”.

(7) Section 584(c) is amended by striking “and to which section 1(h)(11) applies” in the last sentence and inserting “which is qualified dividend income (as defined in section 169(e)) in the hands of such common trust fund”.

(8) Section 641(c)(2)(C) (prior to redesignation by title II) is amended by adding at the end the following new clause:

“(v) The deduction allowed by section 169.”.

(9) The first sentence of section 642(c)(4) is amended by striking “consists of” and all that follows and inserting “consists of long-term capital gain or gain described in section 1202(a), proper adjustments shall be made for any deduction allowable to the trust or estate under section 169 and for any exclusion allowable under section 1202.”.

(10) The last sentence of section 643(a)(3) is amended to read as follows: “The deduction under section 169 and the exclusion under section 1202 shall not be taken into account.”.

(11) Section 691(c)(4) is amended by striking “1(h)” and inserting “169”.

(12) Section 702(a)(5) is amended by striking “section 1(h)(11)” and inserting “section 169”.

(13) Section 854 is amended—

(A) by striking “section 1(h)(11) (relating to maximum rate of tax on dividends)” in subsection (a) and inserting “section 169 (relating to adjusted net capital gain)”,

(B) by striking “Maximum rate under section1(h)” in the heading of subsection (b)(1)(B) and inserting “Determination of adjusted net capital gain”, and

(C) by striking “section 1(h)(11)(B)” in subsection (b)(4) and inserting “section 169(e)”.

(14) Section 857(c)(2) is amended—

(A) by striking “section 1(h)(11)(B)” in subparagraph (D) and inserting “section 169(e)”, and

(B) by striking “Section1(h)(11)” in the heading and inserting “Section169(e)”.

(15) Section 904(b) is amended—

(A) by amending paragraph (2) to read as follows:

“(2) CAPITAL GAINS.—For purposes of this section, taxable income from sources outside the United States shall include gain from the sale or exchange of capital assets (including gain so treated under section 1231) only to the extent of the lesser of—

“(A) capital gain net income from sources without the United States, or

“(B) capital gain net income.”, and

(B) by striking paragraph (3).

(16) Section 1260(a) is amended by striking “long-term capital gain” the first place such term appears and all that follows and inserting “long-term capital gain, such gain shall be treated as ordinary income to the extent such gain exceeds the net underlying long-term capital gain.”.

(17) Section 1411(c)(1)(B) is amended by inserting “(other than section 169)” after “this subtitle”.

(18) Section 4985(a)(1) is amended by striking “the rate of tax specified in section 1(h)(1)(C)” and inserting “21 percent”.

(19) Section 7518(g)(6)(A) is amended by striking all that follows clause (i) and inserting the following:

“(ii) by increasing the tax imposed by chapter 1 by the product of the amount of such withdrawal, multiplied by—

“(I) in the case of a taxpayer other than a corporation, 60 percent of the highest rate of tax specified in section 1, and

“(II) in the case of a corporation, the highest rate of tax specified in section 11.”.

(20) Section 53511(f) of title 46, United States Code, is amended by—

(A) by amending paragraph (1)(B) to read as follows:

“(B) increasing the tax imposed by chapter 1 of such Code by the product of the amount of such withdrawal, multiplied by—

“(i) in the case of a taxpayer other than a corporation, the highest rate of tax specified in section 1 (60 percent of such highest rate in the case of so much of such withdrawal as is made from the capital gain account), and

“(ii) in the case of a corporation, the highest rate of tax specified in section 11.”, and

(B) by striking paragraph (2) and by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

(21) The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the item relating to section 168 the following new item:


“Sec. 169. Adjusted net capital gain.”.

(c) Other conforming amendments.—

(1) Section 25B(b)(2) is amended by striking “In the case of—” and all that follows through “any taxpayer not described in paragraph (1) or subparagraph (A),” and inserting “In the case of any taxpayer not described in paragraph (1),”.

(2) Section 36B(b)(3)(B)(ii)(I)(aa) is amended to read as follows:

“(aa) who is described in section 1(b)(1)(B) and who does not have any dependents for the taxable year,”.

(3) Section 486B(b)(1) is amended—

(A) by striking “maximum rate in effect” and inserting “highest rate specified”, and

(B) by striking “section 1(e)” and inserting “section 1”.

(4) Section 511(b)(1) is amended to read as follows:

“(1) IMPOSITION OF TAX.—There is hereby imposed for each taxable year on the unrelated business taxable income of every trust described in paragraph (2) a tax computed as provided in section 1. In making such computation for purposes of this section, the terms ‘taxable income’ and ‘modified adjusted gross income’ as used in section 1 shall both be read as ‘unrelated business taxable income’ as defined in section 512.”.

(5) Section 641(a) is amended by striking “section 1(e) shall apply to the taxable income” and inserting “section 1 shall apply to the income”.

(6) Section 641(c)(2)(A) is amended to read as follows:

“(A) The dollar amount in effect under section 1(b)(2)(C) shall be treated as being zero.”.

(7) Section 646(b) is amended to read as follows:

“(b) Taxation of income of trust.—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.”.

(8) Section 685(c) is amended by striking “Section 1(e)” and inserting “Section 1”.

(9) Section 1398(c) is amended by striking paragraphs (1) and (2), by redesignating paragraph (3) as paragraph (2), and by inserting before paragraph (2) as so redesignated the following new paragraph:

“(1) COMPUTATION AND PAYMENT OF TAX.—Except as otherwise provided in this section or part I of subchapter A, the taxable income and modified adjusted gross income of the estate shall be computed in the same manner as for an individual. The tax shall be computed under section 1 and shall be paid by the trustee.”.

(10) Section 3402(p)(1)(B) is amended by striking “any percentage applicable to any of the 3 lowest income brackets in the table under section 1(c),” and inserting “10 percent, 25 percent, 35 percent,”.

(11) Section 3402(q)(1) is amended by striking “the third lowest rate of tax applicable under section 1(c)” and inserting “the highest rate of tax specified in section 1”.

(12) Section 3402(r)(3) is amended by striking “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” and inserting “an amount equal to the product of the highest rate of tax specified in section 1 multiplied by”.

(13) Section 3406(a)(1) is amended by striking “the fourth lowest rate of tax applicable under section 1(c)” and inserting “the highest rate of tax specified in section 1”.

(14) Section 6103(e)(1)(A)(iii) is amended by striking “section 1(g)” and inserting “section 1(d)”.

(d) Withholding from supplemental wage payments.—

(1) IN GENERAL.—If an employer elects under Treasury Regulation section 31.3402(g)–1 to determine the amount to be deducted and withheld from any supplemental wage payment by using a flat percentage rate, the rate to be used in determining such amount shall not be less than 35 percent.

(2) REPEAL OF SUPERCEDED PROVISION.—The American Jobs Creation Act of 2004 is amended by striking section 904.

(e) Effective date.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2014.

(2) WITHHOLDING FROM SUPPLEMENTAL WAGE PAYMENTS.—The provisions of, and amendments made by, subsection (d) shall apply to payments made after December 31, 2014.

SEC. 1101. Standard deduction.

(a) Increase in standard deduction.—Subsection (c) of section 63 is amended to read as follows:

“(c) Standard deduction.—For purposes of this subtitle—

“(1) IN GENERAL.—Except as otherwise provided in this subsection, the term ‘standard deduction’ means—

“(A) $22,000, in the case of a joint return, and

“(B) one-half of the amount in effect under subparagraph (A) for the taxable year, in any other case.

“(2) PHASEOUT OF STANDARD DEDUCTION.—The amount of the standard deduction determined under this subsection (without regard to this paragraph and after the application of paragraph (4)) shall be reduced (but not below zero) by an amount equal to 20 percent of the excess (if any) of—

“(A) the taxpayer’s modified adjusted gross income (as defined in section 2(b)) for the taxable year, over

“(B) (i) the joint return standard deduction phaseout threshold for the taxable year, in the case of a taxpayer described in paragraph (1)(A), and

“(ii) the non-joint return standard deduction phaseout threshold for the taxable year, in any other case.

“(3) STANDARD DEDUCTION PHASEOUT THRESHOLDS.—

“(A) JOINT RETURN STANDARD DEDUCTION PHASEOUT THRESHOLD.—The term ‘joint return standard deduction phaseout threshold’ means, with respect to any taxable year—

“(i) the dollar amount in effect under section 1(e)(3)(A) for such taxable year, plus

“(ii) the product of—

“(I) the dollar amount in effect under section 1(b)(1)(A) for such taxable year, multiplied by

“(II) 3.

“(B) NON-JOINT RETURN STANDARD DEDUCTION PHASEOUT THRESHOLD.—The term ‘non-joint return standard deduction phaseout threshold’ means, with respect to any taxable year—

“(i) the dollar amount in effect under section 1(e)(3)(B) for such taxable year, plus

“(ii) the product of—

“(I) the dollar amount in effect under section 1(b)(1)(B) for such taxable year, multiplied by

“(II) 3.

“(4) LIMITATION ON STANDARD DEDUCTION IN THE CASE OF CERTAIN DEPENDENTS.—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—

“(A) $500, or

“(B) the sum of $250 and such individual’s earned income (as defined in section 24(d)(2)).

“(5) CERTAIN INDIVIDUALS, ETC., NOT ELIGIBLE FOR STANDARD DEDUCTION.—In the case of—

“(A) a married individual filing a separate return where such individual’s spouse elects to itemize deductions,

“(B) a nonresident alien individual,

“(C) 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

“(D) an estate or trust, common trust fund, or partnership,

the standard deduction shall be zero.

“(6) INFLATION ADJUSTMENTS.—In the case of any taxable year beginning after 2014, each of the dollar amounts in paragraphs (1)(A) and (4) shall be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) the cost-of-living adjustment determined—

“(i) in the case of the dollar amount in paragraph (1)(A), under section 1(c)(2)(A) for the calendar year in which the taxable year begins,

“(ii) in the case of the dollar amount in paragraph (4)(A), under section 1(c)(2)(A) for the calendar year in which the taxable year begins determined by substituting ‘calendar year 1987’ for ‘calendar year 2012’ in clause (ii) thereof, and

“(iii) in the case of the dollar amount in paragraph (4)(B), under section 1(c)(2)(A) for the calendar year in which the taxable year begins determined by substituting ‘calendar year 1997’ for ‘calendar year 2012’ in clause (ii) thereof.

If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.”.

(b) Additional deduction for unmarried individuals with at least one qualifying child.—

(1) IN GENERAL.—Part VII of subchapter B of chapter 1 is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:

“SEC. 224. Deduction for unmarried individuals with at least one qualifying child.

“(a) In general.—In the case of an unmarried individual with at least one qualifying child (within the meaning of section 7705), there shall be allowed as a deduction an amount equal to $5,500.

“(b) Phaseout of deduction.—The amount of the deduction determined under subsection (a) (without regard to this subsection) shall be reduced (but not below zero) by an amount equal to the excess (if any) of—

“(1) the taxpayer’s adjusted gross income (determined without regard to this section) for the taxable year, over

“(2) $30,000.

“(c) Unmarried individual.—For purposes of this section, the term ‘unmarried individual’ means any individual who—

“(1) is not married as of the close of the taxable year (as determined by applying section 7703),

“(2) is not a surviving spouse (as defined in section 2(a)) for the taxable year, and

“(3) is not a dependent of another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins.

“(d) Inflation adjustments.—

“(1) DEDUCTION AMOUNT.—In the case of any taxable year beginning after 2014, the dollar amount in subsection (a) shall be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins.

“(2) PHASEOUT THRESHOLD.—In the case of any taxable year beginning after 2015, the dollar amount in subsection (b)(2) shall be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) 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 ‘calendar year 2014’ for ‘calendar year 2012’ in clause (ii) thereof.

“(3) ROUNDING.—If any increase determined under paragraph (1) or (2) is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.”.

(2) DEDUCTION ALLOWED WHETHER OR NOT TAXPAYER ITEMIZES DEDUCTIONS.—Section 62(a) is amended by adding at the end the following new paragraph:

“(22) DEDUCTION FOR UNMARRIED INDIVIDUALS WITH AT LEAST ONE QUALIFYING CHILD.—The deduction allowed by section 224.”.

(c) Application of standard deduction phaseout to itemized deductions.—Subsection (f) of section 63 is amended to read as follows:

“(f) Application of phaseout of standard deduction to itemized deductions.—

“(1) IN GENERAL.—In the case of an individual whose modified adjusted gross income (as defined in section 2(b)) exceeds the amount in effect under subsection (c)(2)(B) with respect to the taxpayer for the taxable year, the amount of the itemized deductions otherwise allowable for the taxable year shall be reduced by the lesser of—

“(A) 20 percent of the excess described in subsection (c)(2) with respect to such taxpayer for such taxable year, or

“(B) the amount of the taxpayer’s standard deduction for such taxable year (determined without regard to subsection (c)(2) and without regard to any election to itemize deductions).

“(2) COORDINATION WITH OTHER LIMITATIONS.—This subsection shall be applied after the application of any other limitation on the allowance of any itemized deduction.

“(3) EXCEPTION FOR ESTATES AND TRUSTS.—This subsection shall not apply to any estate or trust.”.

(d) Conforming amendments.—

(1) Sections 86(b)(2)(A) and 137(b)(3)(A) are each amended by inserting “224,” before “911,”.

(2) Section 199(d)(2)(B) is amended by inserting “section 224 and” before “this section”.

(3) Section 469(i)(3)(F)(iii) is amended by inserting “and 224” after “219,”.

(4) Section 1398(c), as amended by section 1003(c), is amended—

(A) by striking “Basic” in the heading thereof,

(B) by striking “Basic standard” in the heading of paragraph (2) and inserting “Standard”, and

(C) by striking “basic” in paragraph (2).

(5) Section 3402(m)(3) is amended by striking “(including the additional standard deduction under section 63(c)(3) for the aged and blind)”.

(6) Section 6014(b)(4) is amended by striking “section 63(c)(5)” and inserting “section 63(c)(4)”.

(7) The table of sections for part VII of subchapter B of chapter 1 is amended by redesignating the item relating to section 224 as an item relating to section 225 and by inserting after the item relating to section 223 the following new item:


“Sec. 224. Deduction for unmarried individuals with at least one qualifying child.”.

(e) Effective date.—The amendment made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1102. Increase and expansion of child tax credit.

(a) In general.—Section 24 is amended to read as follows:

“SEC. 24. Child and dependent tax credit.

“(a) Allowance of credit.—There shall be allowed as a credit against the tax imposed by this chapter for the taxable year with respect to each dependent of the taxpayer an amount equal to $500 ($1,500 in the case of a qualifying child).

“(b) Phaseout of credit.—

“(1) IN GENERAL.—The credit allowed under subsection (a) (determined without regard to this subsection) shall be reduced (but not below zero) by 5 percent of the excess (if any) of—

“(A) the taxpayer’s modified adjusted gross income (as defined in section 2(b)), over

“(B) (i) the joint return child credit phaseout threshold, in the case of a joint return or a surviving spouse (as defined in section 2(a)), or

“(ii) the non-joint return child credit phaseout threshold, in any other case.

“(2) JOINT RETURN CHILD CREDIT PHASEOUT THRESHOLD.—For purposes of this section, the term ‘joint return child credit phaseout threshold’ means, with respect to any taxable year, the sum of—

“(A) the joint return standard deduction phaseout threshold (as defined in section 63(c)(3)(A)), plus

“(B) an amount equal to—

“(i) the dollar amount in effect under section 63(c)(1)(A) for such taxable year, divided by

“(ii) 0.2.

“(3) NON-JOINT RETURN CHILD CREDIT PHASEOUT THRESHOLD.—For purposes of this section, the term ‘non-joint return child credit phaseout threshold’ means, with respect to any taxable year, the sum of—

“(A) the non-joint return standard deduction phaseout threshold (as defined in section 63(c)(3)(B)), plus

“(B) an amount equal to—

“(i) the dollar amount in effect under section 63(c)(1)(B) for such taxable year, divided by

“(ii) 0.2.

“(c) Qualifying child.—For purposes of this section—

“(1) IN GENERAL.—Except as provided in paragraph (2), the term ‘qualifying child’ has the meaning given such term by section 7705.

“(2) EXCEPTION FOR CERTAIN NONCITIZENS.—The term ‘qualifying child’ shall not include any individual who would not be a dependent if subparagraph (A) of section 7705(b)(3) were applied without regard to all that follows ‘resident of the United States’.

“(d) Portion of credit refundable.—

“(1) IN GENERAL.—The aggregate credits allowed under subpart C shall be increased by the lesser of—

“(A) the credit which would be allowed under this section without regard to this subsection and the limitation under section 26(a), or

“(B) the amount by which the aggregate amount of credits allowed under the subpart (determined without regard to this subsection) would increase if the limitation under section 26(a) were increased by 25 percent of the taxpayer’s earned income for the taxable year.

The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under subsection (a) without regard to section 26(a).

“(2) EARNED INCOME.—For purposes of this subsection—

“(A) IN GENERAL.—The term ‘earned income’ means—

“(i) the taxpayer’s wages, salaries, tips, and other employee compensation, but only if such amounts are includible in gross income for the taxable year, plus

“(ii) the taxpayer’s net earnings from self-employment for the taxable year (within the meaning of section 1402(a)) determined with regard to the deduction allowed to the taxpayer by section 164(f).

“(B) SPECIAL RULES.—For purposes of subparagraph (A)—

“(i) the earned income of an individual shall be computed without regard to any community property laws,

“(ii) no amount received as a pension or annuity shall be taken into account,

“(iii) no amount to which section 871(a) applies (relating to income of nonresident alien individuals not connected with United States business) shall be taken into account,

“(iv) no amount received for services provided by an individual while the individual is an inmate at a penal institution shall be taken into account,

“(v) no amount described in subparagraph (A) received for service performed in work activities as defined in paragraph (4) or (7) of section 407(d) of the Social Security Act to which the taxpayer is assigned under any State program under part A of title IV of such Act shall be taken into account, but only to the extent such amount is subsidized under such State program, and

“(vi) amounts excluded from gross income by reason of section 112 shall be taken into account as earned income.

“(C) SPECIAL RULE FOR TAXABLE YEARS BEGINNING BEFORE 2018.—In the case of any taxable year beginning before January 1, 2018, the earned income of the taxpayer taken into account under paragraph (1) shall be reduced (but not below zero) by $3,000.

“(3) EXCEPTION FOR TAXPAYERS EXCLUDING FOREIGN EARNED INCOME.—Paragraph (1) shall not apply to any taxpayer for any taxable year if such taxpayer elects to exclude any amount from gross income under section 911 for such taxable year.

“(e) Inflation adjustment.—In the case of any taxable year beginning after 2014, each dollar amount in subsection (a) shall be increased by an amount equal to—

“(1) such dollar amount, multiplied by

“(2) the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins.

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.

“(f) Identification requirements.—

“(1) IN GENERAL.—No credit shall be allowed under this section to a taxpayer with respect to any dependent unless the taxpayer includes the name and taxpayer identification number of such dependent on the return of tax for the taxable year.

“(2) ADDITIONAL IDENTIFICATION REQUIREMENT WITH RESPECT TO REFUNDABLE CREDIT.—

“(A) IN GENERAL.—Subsection (d) shall not apply to any taxpayer for any taxable year unless the taxpayer includes the taxpayer’s Social Security number on the return of tax for such taxable year.

“(B) JOINT RETURNS.—In the case of a joint return, the requirement of subparagraph (A) shall be treated as met if the Social Security number of either spouse is included on such return.

“(g) Taxable year must be full taxable year.—Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowable under this section in the case of a taxable year covering a period of less than 12 months.”.

(b) Omission of identification information treated as mathematical or clerical error.—Subparagraph (I) of section 6213(g)(2) of such Code is amended to read as follows:

“(I) an omission of a correct TIN under section 24(f)(1) (relating to the child and dependent tax credit), or a correct Social Security number under section 24(f)(2) (relating to the refundable portion of child and dependent tax credit), to be included on a return,”.

(c) Application of rule for short taxable years.—Section 443(c) is amended to read as follows:

“(c) Adjustment in child and dependent tax credit.—If a return is made for a short period by reason of subsection (a)(1) and if the tax is not computed under subsection (b)(2), then the credit allowed under section 24 shall be reduced to an amount which bears the same ratio to the full amount of such credit as the number of months in the short period bears to 12.”.

(d) Clerical amendment.—The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by striking the item relating to section 24 and inserting the following new item:


“Sec. 24. Child and dependent tax credit.”.

(e) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1103. Modification of earned income tax credit.

(a) In general.—Section 32 is amended to read as follows:

“SEC. 32. Earned income.

“(a) In general.—In the case of an individual who is an eligible individual for any taxable year, there shall be allowed as a credit against the tax imposed by this subtitle for such taxable year an amount equal to the taxpayer’s employment-related taxes for such taxable year.

“(b) Limitations.—

“(1) DOLLAR LIMITATION.—The credit allowed under subsection (a) shall not exceed—

“(A) in the case of a taxpayer with 2 or more qualifying children, $3,000 ($4,000 in the case of a joint return), and

“(B) in the case of a taxpayer with 1 qualifying child, $2,400.

“(2) PHASE-OUT OF CREDIT.—The credit allowed under subsection (a) (determined after application of paragraph (1)) shall be reduced (but not below zero) by the sum of—

“(A) 19 percent of so much of the taxpayer’s adjusted gross income (reduced by the amount of any excess described in subparagraph (B)) as exceeds $20,000 ($27,000 in the case of a joint return), plus

“(B) so much of the taxpayer’s investment income for the taxable year as exceeds $3,300.

“(c) Definitions.—For purposes of this section—

“(1) ELIGIBLE INDIVIDUAL.—

“(A) IN GENERAL.—The term ‘eligible individual’ means any individual who has a qualifying child for the taxable year.

“(B) QUALIFYING CHILD INELIGIBLE.—If an individual is the qualifying child of a taxpayer for any taxable year of such taxpayer beginning in a calendar year, such individual shall not be treated as an eligible individual for any taxable year of such individual beginning in such calendar year.

“(C) EXCEPTION FOR INDIVIDUAL CLAIMING BENEFITS UNDER SECTION 911.—The term ‘eligible individual’ does not include any individual who claims the benefits of section 911 (relating to citizens or residents living abroad) for the taxable year.

“(D) LIMITATION ON ELIGIBILITY OF NONRESIDENT ALIENS.—The term ‘eligible individual’ shall not include any individual who is a nonresident alien individual for any portion of the taxable year unless such individual is treated for such taxable year as a resident of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013.

“(2) EMPLOYMENT-RELATED TAXES.—The term ‘employment-related taxes’ means, with respect to any taxpayer for any taxable year, the sum of—

“(A) any tax imposed under sections 3101 or 3111 on the wages (as defined in section 3121(a)) received by the taxpayer during the calendar year in which the taxable year begins,

“(B) any tax imposed under sections 3201(a), 3211(a), or 3221(a) on the compensation (as defined in section 3231(e)) received by the taxpayer during the calendar year in which the taxable year begins, and

“(C) any tax imposed under section 1401 on the self-employment income of the taxpayer for the taxable year.

“(3) QUALIFYING CHILD.—

“(A) IN GENERAL.—The term ‘qualifying child’ means a qualifying child of the taxpayer (within the meaning of section 7705, determined without regard to subsections (c)(1)(D) and (e) thereof).

“(B) PLACE OF ABODE.—For purposes of subparagraph (A), the requirements of section 7705(c)(1)(B) shall be met only if the principal place of abode is in the United States.

“(C) TREATMENT OF MILITARY PERSONNEL STATIONED OUTSIDE THE UNITED STATES.—For purposes of subparagraph (B), the principal place of abode of a member of the Armed Forces of the United States shall be treated as in the United States during any period during which such member is stationed outside the United States while serving on extended active duty with the Armed Forces of the United States. For purposes of the preceding sentence, the term ‘extended active duty’ means any period of active duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.

“(4) INVESTMENT INCOME.—For purposes of paragraph (1), the term ‘investment income’ means—

“(A) interest or dividends to the extent includible in gross income for the taxable year,

“(B) interest received or accrued during the taxable year which is exempt from tax imposed by this chapter,

“(C) the excess (if any) of—

“(i) gross income from rents or royalties not derived in the ordinary course of a trade or business, over

“(ii) the sum of—

“(I) the deductions (other than interest) which are clearly and directly allocable to such gross income, plus

“(II) interest deductions properly allocable to such gross income,

“(D) the capital gain net income (as defined in section 1222) of the taxpayer for such taxable year, and

“(E) the excess (if any) of—

“(i) the aggregate income from all passive activities for the taxable year (determined without regard to any amount with respect to which a tax described in subsection (c)(2) is imposed or an amount described in a preceding subparagraph), over

“(ii) the aggregate losses from all passive activities for the taxable year (as so determined).

For purposes of subparagraph (E), the term ‘passive activity’ has the meaning given such term by section 469.

“(d) Identification requirements.—

“(1) IN GENERAL.—No credit shall be allowed under this section unless the taxpayer includes on the return of tax for the taxable year—

“(A) the taxpayer’s Social Security number, and

“(B) the name, age, and Social Security number of each qualifying child taken into account under subsection (b)(1).

“(2) JOINT RETURNS.—In the case of a joint return, the requirement of paragraph (1)(A) shall be treated as met if the Social Security number of either spouse is included on such return.

“(3) OTHER METHODS OF PROVIDING CHILDREN’S INFORMATION.—The Secretary may prescribe other methods for providing the information described in paragraph (1)(B).

“(e) Restrictions on taxpayers who improperly claimed credit in prior year.—

“(1) TAXPAYERS MAKING PRIOR FRAUDULENT OR RECKLESS CLAIMS.—

“(A) IN GENERAL.—No credit shall be allowed under this section for any taxable year in the disallowance period.

“(B) DISALLOWANCE PERIOD.—For purposes of paragraph (1), the disallowance period is—

“(i) 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

“(ii) 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).

“(2) TAXPAYERS MAKING IMPROPER PRIOR CLAIMS.—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.

“(f) Other special rules.—For purposes of this section—

“(1) MARRIED INDIVIDUALS.—In the case of an individual who is married (within the meaning of section 7703), this section shall apply only if a joint return is filed for the taxable year under section 6013.

“(2) TAXABLE YEAR MUST BE FULL TAXABLE YEAR.—Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowable under this section in the case of a taxable year covering a period of less than 12 months.

“(3) COORDINATION WITH CERTAIN MEANS-TESTED PROGRAMS.—For purposes of—

“(A) the United States Housing Act of 1937,

“(B) title V of the Housing Act of 1949,

“(C) section 101 of the Housing and Urban Development Act of 1965,

“(D) sections 221(d)(3), 235, and 236 of the National Housing Act, and

“(E) the Food and Nutrition Act of 2008,

any refund made to an individual (or the spouse of an individual) by reason of this section, and any payment made to such individual (or such spouse) by an employer under section 3507, shall not be treated as income (and shall not be taken into account in determining resources for the month of its receipt and the following month).

“(4) COORDINATION WITH PAYROLL TAX CREDITS.—The credit allowed under subsection (a) with respect to any taxpayer for any taxable year shall be reduced by the sum of the credits allowed under sections 3103 and 3203 with respect to such taxpayer for such taxable year.

“(g) Application to certain individuals without qualifying children.—For purposes of this section and sections 3103 and 3203—

“(1) IN GENERAL.—In the case of an individual described in paragraph (2)—

“(A) such individual shall be treated as an eligible individual,

“(B) notwithstanding subsection (i), the dollar limitation applicable to such individual under subsection (b)(1) shall be $100 (twice such amount in the case of a joint return),

“(C) subsection (b)(2)(A) shall be applied by substituting ‘$8,000 ($13,000’ for ‘$20,000 ($27,000’, and

“(D) subsection (i)(1) shall not apply and the employment-related taxes with respect to such individual for any taxable year shall not exceed the sum of—

“(i) any tax imposed under section 3101 on the wages (as defined in section 3121(a)) received by the taxpayer during the calendar year in which the taxable year begins,

“(ii) any tax imposed under sections 3201(a) (and so much of the tax imposed by section 3211(a) as is attributable to the rates of tax under subsections (a) and (b) of section 3101) on the compensation (as defined in section 3231(e)) received by the taxpayer during the calendar year in which the taxable year begins, and

“(iii) 50 percent of any tax imposed under section 1401 on the self-employment income of the taxpayer for the taxable year.

“(2) INDIVIDUAL TO WHOM SUBSECTION APPLIES.—An individual is described in this paragraph for any taxable year if—

“(A) such individual does not have a qualifying child for the taxable year,

“(B) such individual’s principal place of abode is in the United States for more than one-half of such taxable year,

“(C) such individual (or, if the individual is married (within the meaning of section 7703), either the individual or the individual’s spouse) has attained age 25 but not attained age 65 before the close of the taxable year, and

“(D) such individual is not a dependent of another taxpayer for any taxable year beginning in the same calendar year as such taxable year.

“(h) Inflation adjustment.—In the case of any taxable year beginning after 2014, both dollar amounts in subsection (b)(1)(A), the dollar amount in subsection (b)(1)(B), both dollar amounts in subsection (b)(2)(A), the dollar amount in subsection (b)(2)(B), the $100 amount in subsection (g)(1)(B), the $8,000 and $13,000 amounts in subsection (g)(1)(C), the $4,000 amount in subsection (i)(2), and the $3,000 amount in subsection (i)(3), shall each be increased by an amount equal to—

“(1) such dollar amount, multiplied by

“(2) the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins.

If any increase determined under the preceding sentence is not a multiple of $100 ($10 in the case of the $100 amount in subsection (g)(1)(B)), such increase shall be rounded to the next lowest multiple of $100 ($10 in the case of the $100 amount in subsection (g)(1)(B)).

“(i) Special rules for taxable years beginning before 2018.—In the case of any taxable year beginning before January 1, 2018—

“(1) subsection (a) shall be applied by substituting ‘200 percent of the taxpayer’s employment-related taxes’ for ‘the taxpayer’s employment-related taxes’,

“(2) subsection (b)(1)(A) shall be applied by substituting ‘$4,000’ for ‘$3,000 ($4,000 in the case of a joint return)’, and

“(3) subsection (b)(1)(B) shall be applied by substituting ‘$3,000’ for ‘$2,400’.”.

(b) Credit allowed against payroll taxes.—

(1) FICA TAX.—Subchapter A of chapter 21 is amended by adding at the end the following new section:

“SEC. 3103. Credit against tax.

“(a) In general.—In the case of an individual who is allowed a credit under section 32 (determined without regard to subsection (f)(4) thereof) for a taxable year, there shall be allowed as a credit against the tax imposed by section 3101 with respect to wages received by such individual during the calendar year ending with or within such taxable year the lesser of—

“(1) the amount of tax so imposed, or

“(2) the amount of the credit allowed under section 32 (as so determined) for such taxable year.

“(b) Application of credit.—The credit determined under subsection (a) shall be taken into account under this title in the same manner as a credit or refund to which the taxpayer is entitled under section 6413(c)(1). Such credit shall not be taken into account for purposes of determining any amount deducted and withheld under section 3102.”.

(2) RAILROAD RETIREMENT TAX.—Subchapter A of chapter 22 is amended by adding at the end the following new section:

“SEC. 3203. Credit against tax.

“(a) In general.—In the case of an individual who is allowed a credit under section 32 (determined without regard to subsection (f)(4) thereof) for a taxable year, there shall be allowed as a credit against the tax imposed by section 3201(a) (and so much of the tax imposed by section 3211(a) as is attributable to the rates of tax under subsections (a) and (b) of section 3101) with respect to compensation received by such individual during the calendar year ending with or within such taxable year the lesser of—

“(1) the amount of tax so imposed, or

“(2) the excess of—

“(A) the amount of the credit allowed under section 32 (as so determined) for such taxable year, over

“(B) the amount of the credit allowed under section 3103.

“(b) Application of credit.—The credit determined under subsection (a) shall be taken into account under this title in the same manner as a credit or refund to which the taxpayer is entitled under section 6413(c)(1). Such credit shall not be taken into account for purposes of determining any amount deducted and withheld under section 3202.”.

(c) Conforming amendments.—

(1) Section 86(f)(2) is amended by striking “section 32(c)(2)” and inserting “section 24(d)(2)”.

(2) Section 129(e)(2) is amended by striking “section 32(c)(2)” and inserting “section 24(d)(2)”

(3) Section 6051(a)(10) is amended by striking “for purposes of section 32 (relating to earned income credit)” and inserting “under section 24(d)(2)”.

(4) Section 6211(b)(4)(A) is amended by inserting “(determined without regard to subsection (f)(4) thereof)” after “32”.

(5) Section 6213(g)(2)(F) is amended by striking “taxpayer identification number” and inserting “Social Security number”.

(6) Section 6213(g)(2)(G) is amended by striking “with respect to” and all that follows and inserting “with respect to the tax imposed under section 1401 (relating to self-employment tax) to the extent such tax has not been paid,”.

(7) Section 6213(g)(2)(K) is amended by striking “section 32(k)(2)” and inserting “section 32(e)(2)”.

(8) Section 7705(f)(6)(B), as redesignated by this Act, is amended by striking clause (iv), by striking “, and” at the end of clause (iii) and inserting a period, and by inserting “and” at the end of clause (ii).

(9) The table of sections for subchapter A of chapter 21 is amended by adding at the end the following new item:


“Sec. 3103. Credit against tax.”.

(10) The table of sections for subchapter A of chapter 22 is amended by adding at the end the following new item:


“Sec. 3203. Credit against tax.”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

(e) Treatment of taxpayers who improperly claimed credit in prior years.—A claim of credit under section 32 of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section) shall not fail to be taken into account under subsection (e) of such section (as amended by this section) merely because such claim is for a taxable year beginning before January 1, 2015.

(f) Treasury report on making credit advanceable.—Not later than the date which is 180 days after the date of the enactment of this Act, the Secretary of the Treasury (or the Secretary’s designee) shall submit a report to Congress making recommendations regarding the best method for providing for advance payment of the credits established by the amendments made by this section. The recommendations in such report shall seek to—

(1) provide for the payment of such credits to taxpayers as promptly as is feasible, including on a weekly, biweekly, or monthly basis, and

(2) minimize any administrative burdens on employers and the Internal Revenue Service.

SEC. 1104. Repeal of deduction for personal exemptions.

(a) In general.—Part V of subchapter B of chapter 1 is hereby repealed.

(b) Definition of dependent retained.—

(1) IN GENERAL.—Section 152, prior to repeal by subsection (a), is hereby redesignated as section 7705 and moved to the end of chapter 79.

(2) MODIFICATION OF AGE REQUIREMENTS.—Section 7705(c)(3)(A), as redesignated by paragraph (1), is amended by striking “as a qualifying child and—” and all that follows and inserting “is a qualifying child and has not attained the age of 18 as of the close of the calendar year in which the taxable year of the taxpayer begins.”.

(c) Application to estates and trusts.—Subsection (b) of section 642 is amended—

(1) by striking paragraph (2)(C),

(2) by striking paragraph (3), and

(3) by striking “Deduction for personal exemption” in the heading thereof and inserting “Basic deduction”.

(d) Application to nonresident aliens.—Section 873(b) is amended by striking paragraph (3).

(e) Modification of wage withholding rules.—

(1) IN GENERAL.—Section 3402(a)(2) is amended by striking “the amount of one personal exemption provided in section 151(b)” and inserting “$3,900”.

(2) INFLATION ADJUSTMENT.—Section 3402(a) is amended by adding at the end the following new paragraph:

“(3) INFLATION ADJUSTMENT.—In the case of any calendar year beginning after 2014, the $3,900 amount in paragraph (2) shall be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year.

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.”.

(3) NUMBER OF EXEMPTIONS.—Section 3402(f)(1) is amended—

(A) in subparagraph (A), by striking “an individual described in section 151(d)(2)” and inserting “a dependent of any other taxpayer”, and

(B) in subparagraph (C), by striking “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)” and inserting “who, on the basis of facts existing at the beginning of such day, is reasonably expected to be a dependent of the employee”.

(f) Modification of return requirement.—

(1) IN GENERAL.—Paragraph (1) of section 6012(a) is amended to read as follows:

“(1) Every individual who has gross income for the taxable year, except that a return shall not be required of—

“(A) 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

“(B) an individual entitled to make a joint return if—

“(i) 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,

“(ii) such individual and such individual’s spouse have the same household as their home at the close of the taxable year,

“(iii) such individual’s spouse does not make a separate return, and

“(iv) neither such individual nor such individual’s spouse is an individual described in section 63(c)(4) who has income (other than earned income) in excess of the amount in effect under section 63(c)(4)(A).”.

(2) BANKRUPTCY ESTATES.—Paragraph (8) of section 6012(a) is amended by striking “the sum of the exemption amount plus the basic standard deduction under section 63(c)(2)(D)” and inserting “the standard deduction in effect under section 63(c)(1)(B)”.

(g) Conforming amendments.—

(1) Section 2(a)(1)(B) is amended by striking “a dependent” and all that follows through “section 151” and inserting “a dependent who (within the meaning of section 7705, determined without regard to subsections (b)(1), (b)(2) and (d)(1)(B) thereof) is a son, stepson, daughter, or stepdaughter of the taxpayer”.

(2) Section 36B(b)(2)(A) is amended by striking “section 152” and inserting “section 7705”.

(3) Section 36B(b)(3)(B) is amended by striking “unless a deduction is allowed under section 151 for the taxable year with respect to a dependent” in the flush matter at the end and inserting “unless the taxpayer has a dependent for the taxable year”.

(4) Section 36B(c)(1)(D) is amended by striking “with respect to whom a deduction under section 151 is allowable to another taxpayer” and inserting “who is a dependent of another taxpayer”.

(5) Section 36B(d)(1) is amended by striking “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” and inserting “the sum of 1 (2 in the case of a joint return) plus the number of the taxpayer’s dependents for the taxable year”.

(6) Section 36B(e)(1) is amended by striking “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)” and inserting “1 or more of the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer”.

(7) Section 42(i)(3)(D)(ii)(I) is amended—

(A) by striking “section 152” and inserting “section 7705”, and

(B) by striking the period at the end and inserting a comma.

(8) Section 63(b) is amended by striking “minus—” and all that follows and inserting “minus the standard deduction.”.

(9) Section 63(d) is amended by striking “other than—” and all that follows and inserting “other than the deductions allowable in arriving at adjusted gross income.”.

(10) Section 72(t)(2)(D)(i)(III) is amended by striking “section 152” and inserting “section 7705”.

(11) Section 72(t)(7)(A)(iii) is amended by striking “section 152(f)(1)” and inserting “section 7705(f)(1)”.

(12) Section 105(b) is amended—

(A) by striking “as defined in section 152” and inserting “as defined in section 7705”,

(B) by striking “section 152(f)(1)” and inserting “section 7705(f)(1)” and

(C) by striking “section 152(e)” and inserting “section 7705(e)”.

(13) Section 105(c)(1) is amended by striking “section 152” and inserting “section 7705”.

(14) Section 125(e)(1)(D) is amended by striking “section 152” and inserting “section 7705”.

(15) Section 129(c) is amended—

(A) by striking “with respect to whom, for such taxable year, a deduction is allowable under section 151(c) (relating to personal exemptions for dependents) to” in paragraph (1) and inserting “who is a dependent of”, and

(B) by striking “section 152(f)(1)” in paragraph (2) and inserting “section 7705(f)(1)”.

(16) Section 132(h)(2)(B) is amended—

(A) by striking “section 152(f)(1)” and inserting “section 7705(f)(1)”, and

(B) by striking “section 152(e)” and inserting “section 7705(e)”.

(17) Section 139D(c)(5) is amended by striking “section 152” and inserting “section 7705”.

(18) Section 162(l)(1)(D) is amended by striking “section 152(f)(1)” and inserting “section 7705(f)(1)”.

(19) Section 170(g)(1) is amended by striking “section 152” and inserting “section 7705”.

(20) Section 170(g)(3) is amended by striking “section 152(d)(2)” and inserting “section 7705(d)(2)”.

(21) Section 172(d) is amended by striking paragraph (3).

(22) Section 220(b)(6) is amended by striking “with respect to whom a deduction under section 151 is allowable to” and inserting “who is a dependent of”.

(23) Section 220(d)(2)(A) is amended by striking “section 152” and inserting “section 7705”.

(24) Section 223(b)(6) is amended by striking “with respect to whom a deduction under section 151 is allowable to” and inserting “who is a dependent of”.

(25) Section 223(d)(2)(A) is amended by striking “section 152” and inserting “section 7705”.

(26) Section 401(h) is amended by striking “section 152(f)(1)” in the last sentence and inserting “section 7705(f)(1)”.

(27) Section 402(l)(4)(D) is amended by striking “section 152” and inserting “section 7705”.

(28) Section 409A(a)(2)(B)(ii)(I) is amended by striking “section 152(a)” and inserting “section 7705(a)”.

(29) Section 501(c)(9) is amended by striking “section 152(f)(1)” and inserting “section 7705(f)(1)”.

(30) Section 529(e)(2)(B) is amended by striking “section 152(d)(2)” and inserting “section 7705(d)(2)”.

(31) Section 703(a)(2) is amended by striking subparagraph (A) and by redesignating subparagraphs (B) through (F) as subparagraphs (A) through (E), respectively.

(32) Section 874 is amended by striking subsection (b) and by redesignating subsection (c) as subsection (b).

(33) Section 891 is amended by striking “under section 151 and”.

(34) Section 904(b) is amended by striking paragraph (1).

(35) Section 931(b)(1) is amended by striking “(other than the deduction under section 151, relating to personal exemptions)”.

(36) Section 933 is amended—

(A) by striking “(other than the deduction under section 151, relating to personal exemptions)” in paragraph (1), and

(B) by striking “(other than the deduction for personal exemptions under section 151)” in paragraph (2).

(37) Section 1212(b)(2)(B)(ii) is amended to read as follows:

“(ii) in the case of an estate or trust, the deduction allowed for such year under section 642(b).”.

(38) Section 1361(c)(1)(C) is amended by striking “section 152(f)(1)(C)” and inserting “section 7705(f)(1)(C)”.

(39) Section 1402(a) is amended by striking paragraph (7).

(40) Section 2032A(c)(7)(D) is amended by striking “section 152(f)(2)” and inserting “section 7705(f)(2)”.

(41) Section 3402(m)(1) is amended by striking “other than the deductions referred to in section 151 and”.

(42) Section 3402(r)(2) is amended by striking “the sum of—” and all that follows and inserting “the standard deduction in effect under section 63(c)(1)(B).”.

(43) Section 5000A(b)(3)(A) is amended by striking “section 152” and inserting “section 7705”.

(44) Section 5000A(c)(4)(A) is amended by striking “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” and inserting “the sum of 1 (2 in the case of a joint return) plus the number of the taxpayer’s dependents for the taxable year”.

(45) Section 6013(b)(3)(A) is amended—

(A) by striking “had less than the exemption amount of gross income” in clause (ii) and inserting “had no gross income”,

(B) by striking “had gross income of the exemption amount or more” in clause (iii) and inserting “had any gross income”, and

(C) by striking the flush language following clause (iii).

(46) Section 6103(l)(21)(A)(iii) is amended to read as follows:

“(iii) the number of the taxpayer’s dependents,”.

(47) Section 6213(g)(2) is amended by striking subparagraph (H).

(48) Section 6334(d)(2) is amended to read as follows:

“(2) EXEMPT AMOUNT.—

“(A) IN GENERAL.—For purposes of paragraph (1), the term ‘exempt amount’ means an amount equal to—

“(i) the sum of the standard deduction and the personal exemption amount, divided by

“(ii) 52.

“(B) PERSONAL EXEMPTION AMOUNT.—For purposes of subparagraph (A), the personal exemption amount is $3,900 multiplied by the number of the taxpayer’s dependents for the taxable year in which the levy occurs.

“(C) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after 2014, the $3,900 amount in subparagraph (B) shall be increased by an amount equal to—

“(i) such dollar amount, multiplied by

“(ii) the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins.

If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.

“(D) VERIFIED STATEMENT.—Unless the taxpayer submits to the Secretary a written and properly verified statement specifying the facts necessary to determine the proper amount under subparagraph (A), subparagraph (A) shall be applied as if the taxpayer were a married individual filing a separate return with no dependents.”.

(49) Section 7702B(f)(2)(C)(iii) is amended by striking “section 152(d)(2)” and inserting “section 7705(d)(2)”.

(50) Section 7703(a) is amended by striking “part V of subchapter B of chapter 1 and”.

(51) Section 7703(b)(1) is amended by striking “section 152(f)(1)” and all that follows and inserting “section 7705(f)(1),”.

(52) Section 7705(a), as redesignated by this section, is amended by striking “this subtitle” and inserting “subtitle A”.

(53) (A) Section 7705(d)(1)(B), as redesignated by this section, is amended by striking “the exemption amount (as defined in section 151(d))” and inserting “$3,900”.

(B) Section 7705(d), as redesignated by this section, is amended by adding at the end the following new paragraph:

“(6) INFLATION ADJUSTMENT.—In the case of any calendar year beginning after 2014, the $3,900 amount in paragraph (1)(B) shall be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year.

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.”.

(54) The table of sections for chapter 79 is amended by adding at the end the following new item:


“Sec. 7705. Dependent defined.”.

(h) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1201. American opportunity tax credit.

(a) In general.—Section 25A is amended to read as follows:

“SEC. 25A. American opportunity tax credit.

“(a) In general.—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—

“(1) 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

“(2) 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.

“(b) Portion of credit refundable.—So much of the credit allowable under subsection (a) (determined without regard to this subsection and section 26(a) and after application of all other provisions of this section) as does not exceed $1,500 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.

“(c) Limitation based on modified adjusted gross income.—

“(1) IN GENERAL.—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—

“(A) the excess of—

“(i) the taxpayer’s modified adjusted gross income for such taxable year, over

“(ii) $43,000 (twice such amount in the case of a joint return), bears to

“(B) $20,000 (twice such amount in the case of a joint return).

“(2) MODIFIED ADJUSTED GROSS INCOME.—For purposes of this subsection, the term ‘modified adjusted gross income’ 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.

“(d) Other limitations.—

“(1) CREDIT ALLOWED ONLY FOR 4 TAXABLE YEARS.—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 4 prior taxable years.

“(2) CREDIT ALLOWED ONLY FOR FIRST 4 YEARS OF POSTSECONDARY EDUCATION.—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 4 years of postsecondary education at an eligible educational institution.

“(e) Definitions.—For purposes of this section—

“(1) ELIGIBLE STUDENT.—The term ‘eligible student’ means, with respect to any academic period, a student who—

“(A) meets the requirements of section 484(a)(1) of the Higher Education Act of 1965 (20 U.S.C. 1091(a)(1)), as in effect on August 5, 1997, and

“(B) is carrying at least 12 the normal full-time work load for the course of study the student is pursuing.

“(2) QUALIFIED TUITION AND RELATED EXPENSES.—

“(A) IN GENERAL.—The term ‘qualified tuition and related expenses’ means tuition, fees, and course materials, required for enrollment or attendance of—

“(i) the taxpayer,

“(ii) the taxpayer’s spouse, or

“(iii) any dependent of the taxpayer,

at an eligible educational institution for courses of instruction of such individual at such institution.

“(B) EXCEPTION FOR EDUCATION INVOLVING SPORTS, ETC.—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.

“(C) EXCEPTION FOR NONACADEMIC FEES.—Such term does not include student activity fees, athletic fees, insurance expenses, or other expenses unrelated to an individual's academic course of instruction.

“(3) ELIGIBLE EDUCATIONAL INSTITUTION.—The term ‘eligible educational institution’ means an institution—

“(A) which is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect on August 5, 1997, and

“(B) which is eligible to participate in a program under title IV of such Act.

“(f) Special rules.—

“(1) IDENTIFICATION REQUIREMENT.—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, and the employer identification number of any institution to which such expenses were paid, on the return of tax for the taxable year.

“(2) ADJUSTMENT FOR CERTAIN SCHOLARSHIPS, ETC.—

“(A) IN GENERAL.—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—

“(i) a qualified scholarship which is excludable from gross income under section 117,

“(ii) an educational assistance allowance under chapter 30, 31, 32, 34, or 35 of title 38, United States Code, or under chapter 1606 of title 10, United States Code, and

“(iii) 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.

“(B) COORDINATION WITH PELL GRANTS NOT USED FOR QUALIFIED TUITION AND RELATED EXPENSES.—For purposes of subparagraph (A), the amount of any Federal Pell Grant under section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a) shall be reduced (but not below zero) by the amount of expenses (other than qualified tuition and related expenses) which are taken into account in determining the cost of attendance (as defined in section 472 of the Higher Education Act of 1965, as in effect on the date of the enactment of this paragraph) of such individual at an eligible educational institution for the academic period for which the credit under this section is being determined.

“(3) TREATMENT OF EXPENSES PAID BY DEPENDENT.—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—

“(A) no credit shall be allowed under subsection (a) to such individual for such individual’s taxable year, and

“(B) 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.

“(4) TREATMENT OF CERTAIN PREPAYMENTS.—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.

“(5) DENIAL OF DOUBLE BENEFIT.—No credit shall be allowed under this section for any amount for which a deduction is allowed under any other provision of this chapter.

“(6) NO CREDIT FOR MARRIED INDIVIDUALS FILING SEPARATE RETURNS.—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.

“(7) NONRESIDENT ALIENS.—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.

“(g) Inflation adjustment.—

“(1) IN GENERAL.—In the case of a taxable year beginning after 2018, the $2,000 amount in subsection (a)(1), the $1,500 amount in subsection (b), and the $43,000 amount in subsection (c)(1)(A)(ii) shall each be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) 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 ‘calendar year 2017’ for ‘calendar year 2012’ in clause (ii) thereof.

“(2) ROUNDING.—If any amount as adjusted under paragraph (1) is not a multiple of $100 ($1,000 in the case of the amount in subsection (c)(1)(A)(ii)), such amount shall be rounded to the next lowest multiple of $100 ($1,000 in the case of the amount in subsection (c)(1)(A)(ii)).

“(h) Regulations.—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.”.

(b) Requirement To report tuition paid rather than tuition billed.—Section 6050S(b)(2)(B)(i) is amended by striking “or the aggregate amount billed”.

(c) Conforming amendments.—

(1) Section 72(t)(7)(B) of such Code is amended by striking “section 25A(g)(2)” and inserting “section 25A(f)(2)”.

(2) Section 529(c)(3)(B)(v)(I) of such Code is amended by striking “section 25A(g)(2)” and inserting “section 25A(f)(2)”.

(3) Section 529(e)(3)(B)(i) of such Code is amended by striking “section 25A(b)(3)” and inserting “section 25A(d)”.

(4) Section 530(d)(2)(C) of such Code is amended—

(A) by striking “section 25A(g)(2)” in clause (i)(I) and inserting “section 25A(f)(2)”, and

(B) by striking “Hope and Lifetime Learning credits” in the heading and inserting “American opportunity tax credit”.

(5) Section 530(d)(4)(B)(iii) of such Code is amended by striking “section 25A(g)(2)” and inserting “section 25A(d)(4)(B)”.

(6) Section 6050S(e) of such Code is amended by striking “subsection (g)(2)” and inserting “subsection (f)(2)”.

(7) Section 6211(b)(4)(A) of such Code is amended by striking “subsection (i)(6)” and inserting “subsection (b)”.

(8) Section 6213(g)(2)(J) of such Code is amended by striking “TIN required under section 25A(g)(1)” and inserting “TIN, and employer identification number, required under section 25A(f)(1)”.

(9) Section 1004(c) of division B of the American Recovery and Reinvestment Tax Act of 2009 is amended—

(A) in paragraph (1)—

(i) by striking “section 25A(i)(6)” each place it appears and inserting “section 25A(b)”, and

(ii) by striking “with respect to taxable years beginning after 2008 and before 2018” each place it appears and inserting “with respect to each taxable year”,

(B) in paragraph (2), by striking “Section 25A(i)(6)” and inserting “Section 25A(b)”, and

(C) in paragraph (3)(C), by striking “subsection (i)(6)” and inserting “subsection (b)”.

(10) The table of sections for subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the item relating to section 25A and inserting the following new item:


“Sec. 25A. American opportunity tax credit.”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1202. Expansion of Pell Grant exclusion from gross income.

(a) In general.—Paragraph (1) of section 117(b) of the Internal Revenue Code of 1986 is amended—

(1) by striking the period at the end and inserting “, or”,

(2) by striking “received by an individual as a scholarship” and inserting the following: “received by an individual—

“(A) as a scholarship”, and

(3) by adding at the end the following new subparagraph:

“(B) as a Federal Pell Grant under section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a).”.

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1203. Repeal of exclusion of income from United States savings bonds used to pay higher education tuition and fees.

(a) In general.—Part III of subchapter B of chapter 1 is amended by striking section 135 (and by striking the item relating to such section in the table of sections for such part).

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1204. Repeal of deduction for interest on education loans.

(a) In general.—Part VII of subchapter B of chapter 1 is amended by striking section 221 (and by striking the item relating to such section in the table of sections for such part).

(b) Conforming amendment.—Section 62(a) is amended by striking paragraph (17).

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1205. Repeal of deduction for qualified tuition and related expenses.

(a) In general.—Part VII of subchapter B of chapter 1 is amended by striking section 222 (and by striking the item relating to such section in the table of sections for such part).

(b) Conforming amendment.—Section 62(a) is amended by striking paragraph (18).

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2013.

SEC. 1206. No new contributions to Coverdell education savings accounts.

(a) In general.—Section 530(b)(1)(A) is amended to read as follows:

“(A) Except in the case of rollover contributions, no contribution will be accepted after December 31, 2014.”.

(b) Rollovers to qualified tuition programs permitted.—Section 530(d)(5) is amended by inserting “, or into (by purchase or contribution) a qualified tuition program (as defined in section 529),” after “into another Coverdell education savings account”.

(c) Effective dates.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to contributions made after December 31, 2014.

(2) ROLLOVERS TO QUALIFIED TUITION PROGRAMS.—The amendments made by subsection (b) shall apply to distributions after December 31, 2014.

SEC. 1207. Repeal of exclusion for discharge of student loan indebtedness.

(a) In general.—Section 108 is amended by striking subsection (f).

(b) Conforming amendments.—

(1) Section 3121(a)(20) is amended by striking “108(f)(4),”.

(2) Section 209(a)(17) of the Social Security Act is amended by striking “108(f)(4),”.

(3) Section 3231(e)(5) is amended by striking “108(f)(4),”.

(4) Section 3306(b)(16) is amended by striking “108(f)(4),”.

(5) Section 3401(a)(19) is amended by striking “108(f)(4),”.

(c) Effective date.—The amendments made by this section shall apply to amounts discharged after December 31, 2014.

SEC. 1208. Repeal of exclusion for qualified tuition reductions.

(a) In general.—Section 117 is amended by striking subsection (d).

(b) Conforming amendments.—

(1) Section 117(c)(1) is amended—

(A) by striking “subsections (a) and (d)” and inserting “subsection (a)”, and

(B) by striking “or qualified tuition reduction”.

(2) Section 414(n)(3)(C) is amended by striking “117(d),”.

(3) Section 414(t)(2) is amended by striking “117(d),”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1209. Repeal of exclusion for education assistance programs.

(a) In general.—Part III of subchapter B of chapter 1 is amended by striking section 127 (and by striking the item relating to such section in the table of sections for such part).

(b) Conforming amendments.—

(1) Section 125(f)(1) is amended by striking “127,”.

(2) Section 132(j)(8) is amended by striking “which are not excludable from gross income under section 127”.

(3) Section 137(c) is amended to read as follows:

“(c) Adoption assistance program.—

“(1) IN GENERAL.—For purposes of this section, an adoption assistance program is a separate written plan of an employer for the exclusive benefit of such employer’s employees under which the employer provides such employees with adoption assistance. Except as provided in paragraph (6), such program must meet the requirements of paragraphs (2), (3), and (4).

“(2) ELIGIBILITY.—The program shall benefit employees who qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of employees who are highly compensated employees (within the meaning of section 414(q)) or their dependents. For purposes of this paragraph, there shall be excluded from consideration employees not included in the program who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that adoption assistance benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.

“(3) PRINCIPAL SHAREHOLDERS OR OWNERS.—Not more than 5 percent of the amounts paid or incurred by the employer for adoption assistance during the year may be provided for the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the year) owns more than 5 percent of the stock or of the capital or profits interest in the employer.

“(4) NOTIFICATION OF EMPLOYEES.—Reasonable notification of the availability and terms of the program must be provided to eligible employees.

“(5) NO FUNDING REQUIRED.—A program referred to in paragraph (1) is not required to be funded.

“(6) CERTAIN FEDERAL PROGRAMS.—An adoption reimbursement program operated under section 1052 of title 10, United States Code (relating to armed forces) or section 514 of title 14, United States Code (relating to members of the Coast Guard) shall be treated as an adoption assistance program for purposes of this section.”.

(4) Section 414(n)(3)(C) is amended by striking “127,”.

(5) Section 414(t)(2) is amended by striking “127,”.

(6) Section 3121(a)(18) is amended by striking “127,”.

(7) Section 209(a)(15) of the Social Security Act is amended by striking “127 or”.

(8) Section 3231(e) is amended by striking paragraph (6).

(9) Section 3306(b)(13) is amended by striking “127,”.

(10) Section 3401(a)(18) is amended by striking “127,”.

(11) Section 6039D(d)(1) is amended by striking “127,”.

(c) Effective date.—The amendments made by this section shall apply to amounts paid or incurred after December 31, 2014.

SEC. 1210. Repeal of exception to 10-percent penalty for higher education expenses.

(a) In general.—Section 72(t)(2) is amended by striking subparagraph (E).

(b) Conforming amendment.—Section 72(t) is amended by striking paragraph (7).

(c) Effective date.—The amendments made by this section shall apply to distributions after December 31, 2014.

SEC. 1301. Repeal of dependent care credit.

(a) In general.—Subpart A of part IV of subchapter A of chapter 1 is amended by striking section 21 (and by striking the item relating to such section in the table of sections for such subpart).

(b) Conforming amendments.—

(1) (A) Section 129(a)(2) is amended by striking subparagraph (C).

(B) Section 129(e) is amended by adding at the end the following new paragraph:

“(10) MARITAL STATUS.—Rules similar to the rules of subsections (a) and (b) of section 7703 shall apply for purposes of this section.”.

(2) Section 129(e)(1) is amended to read as follows:

“(1) DEPENDENT CARE ASSISTANCE.—

“(A) IN GENERAL.—The term ‘dependent care assistance’ means employment-related expenses and the provision of services which constitute employment-related expenses.

“(B) EMPLOYMENT-RELATED EXPENSES.—The term ‘employment-related expenses’ means amounts paid for the following expenses, but only if such expenses are incurred to enable the employee to be gainfully employed for any period for which there are 1 or more qualifying individuals with respect to the employee:

“(i) expenses for household services, and

“(ii) expenses for the care of a qualifying individual.

Such term shall not include any amount paid for services outside the employee’s household at a camp where the qualifying individual stays overnight.

“(C) EXCEPTION.—Employment-related expenses described in subparagraph (A) which are incurred for services outside the employee’s household shall be taken into account only if incurred for the care of—

“(i) a qualifying individual described in subparagraph (D)(i), or

“(ii) a qualifying individual (not described in subparagraph (D)(i)) who regularly spends at least 8 hours each day in the employee’s household.

“(D) QUALIFYING INDIVIDUAL.—The term ‘qualifying individual’ means—

“(i) a dependent of the taxpayer (as defined in section 7705(a)(1)) who has not attained age 13,

“(ii) a dependent of the taxpayer (as defined in section 7705, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B)) who is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year, or

“(iii) the spouse of the taxpayer, if the spouse is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year.

“(E) DEPENDENT CARE CENTERS.—Employment-related expenses described in subparagraph (A) which are incurred for services provided outside the employee’s household by a dependent care center shall be taken into account only if—

“(i) such center complies with all applicable laws and regulations of a State or unit of local government, and

“(ii) the requirements of subparagraph (B) are met.

“(F) DEPENDENT CARE CENTER DEFINED.—For purposes of this paragraph, the term ‘dependent care center’ means any facility which—

“(i) provides care for more than six individuals (other than individuals who reside at the facility), and

“(ii) receives a fee, payment, or grant for providing services for any of the individuals (regardless of whether such facility is operated for profit).

“(G) PLACE OF ABODE.—For purposes of this paragraph, an individual shall not be treated as having the same principal place of abode as the taxpayer if at any time during the taxable year of the taxpayer the relationship between the individual and the taxpayer is in violation of local law.

“(H) SPECIAL DEPENDENCY TEST IN CASE OF DIVORCED PARENTS, ETC..—If—

“(i) section 7705(e) applies to any child with respect to any calendar year, and

“(ii) such child is under the age of 13 or is physically or mentally incapable of caring for himself, in the case of any taxable year beginning in such calendar year,

such child shall be treated as a qualifying individual described in clause (i) or (ii) of subparagraph (D) (whichever is appropriate) with respect to the custodial parent (as defined in section 7705(e)(4)(A)), and shall not be treated as a qualifying individual with respect to the noncustodial parent.”.

(3) Section 6213(g)(2)(L) is amended by striking “21,”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1302. Repeal of credit for adoption expenses.

(a) In general.—Subpart A of part IV of subchapter A of chapter 1 is amended by striking section 23 (and by striking the item relating to such section in the table of sections for such subpart).

(b) Conforming amendments.—

(1) Section 137 is amended by striking subsections (d) and (e).

(2) Subsections (d) and (e) of section 23 (prior to being stricken by subsection (a)) are each moved to section 137 (after amendment by paragraph (1)) and inserted after subsection (c) as new subsections (d) and (e), respectively.

(3) Section 137(d)(1)(D), as amended by paragraphs (1) and (2), is amended by inserting “(determined without regard to reimbursements under this section)” before the period at the end.

(4) Section 137(e), as amended by paragraphs (1) and (2), is amended by striking “(as defined in section 217(h)(3))” and inserting “(or any possession of the United States)”.

(5) Section 137 is amended by redesignating subsection (f) as subsection (h), and by inserting before subsection (h) (as so redesignated) the following new subsections:

“(f) Filing requirements.—

“(1) MARRIED COUPLES MUST FILE JOINT RETURN.—

“(A) IN GENERAL.—If the taxpayer is married at the close of the taxable year, subsection (a) shall apply to the taxpayer only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year.

“(B) MARITAL STATUS.—Rules similar to the rules of subsections (a) and (b) of section 7703 shall apply for purposes of this section.

“(2) TAXPAYER MUST INCLUDE TIN.—

“(A) IN GENERAL.—Subsection (a) shall apply with respect to any child only if the taxpayer includes (if known) the name, age, and TIN of such child on the return of tax for the taxable year.

“(B) OTHER METHODS.—The Secretary may, in lieu of the information referred to in subparagraph (A), require other information meeting the purposes of subparagraph (A), including identification of an agent assisting with the adoption.

“(g) Basis adjustments.—For purposes of this subtitle, if the amount of any expenditure with respect to any property is excluded from gross income under this section, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of such expenditure which is so excluded.”.

(6) Section 1016(a)(26) is amended by striking “sections 23(g) and 137(e)” and inserting “section 137(g)”.

(c) Effective date.—

(1) IN GENERAL.—The amendments made by this section shall apply to amounts paid or incurred after December 31, 2014.

(2) SPECIAL NEEDS ADOPTIONS.—For purposes of paragraph (1), any amount treated as paid by the taxpayer under section 23(a)(3) of the Internal Revenue Code of 1986 (as in effect before its repeal by subsection (a)) shall be treated as paid on the date that the adoption referred to in such section becomes final.

SEC. 1303. Repeal of credit for nonbusiness energy property.

(a) In general.—Subpart A of part IV of subchapter A of chapter 1 is amended by striking section 25C (and by striking the item relating to such section in the table of sections of such subpart).

(b) Conforming amendment.—Section 1016(a) is amended by striking paragraph (33).

(c) Effective date.—The amendments made by this section shall apply to property placed in service after December 31, 2013.

SEC. 1304. Repeal of credit for residential energy efficient property.

(a) In general.—Subpart A of part IV of subchapter A of chapter 1 is amended by striking section 25D (and by striking the item relating to such section in the table of sections for such subpart).

(b) Conforming amendment.—Section 1016(a) is amended by striking paragraph (34).

(c) Effective date.—The amendment made by this section shall apply to property placed in service after December 31, 2014.

SEC. 1305. Repeal of credit for qualified electric vehicles.

(a) In general.—Subpart B of part IV of subchapter A of chapter 1 is amended by striking section 30 (and by striking the item relating to such section in the table of sections of such subpart).

(b) Conforming amendments.—

(1) Section 1016(a) is amended by striking paragraph (25).

(2) Section 6501(m) is amended by striking “section 30(e)(6),”.

(c) Effective date.—The amendments made by this section shall apply to vehicles acquired after December 31, 2011.

SEC. 1306. Repeal of alternative motor vehicle credit.

(a) In general.—Subpart B of part IV of subchapter A of chapter 1 is amended by striking section 30B (and by striking the item relating to such section in the table of sections for such subpart).

(b) Conforming amendments.—

(1) Section 38(b) is amended by striking paragraph (25).

(2) Section 1016(a) is amended by striking paragraph (35).

(3) Section 6501(m) is amended by striking “30B(h)(9),”.

(c) Effective date.—The amendment made by this section shall apply to property purchased after December 31, 2014.

SEC. 1307. Repeal of alternative fuel vehicle refueling property credit.

(a) In general.—Subpart B of part IV of subchapter A of chapter 1 is amended by striking section 30C (and by striking the item relating to such section in the table of sections for such subpart).

(b) Conforming amendments.—

(1) Section 38(b) is amended by striking paragraph (26).

(2) Section 1016(a) is amended by striking paragraph (36).

(3) Section 6501(m) is amended by striking “30C(e)(5),”.

(c) Effective date.—The amendment made by this section shall apply to property placed in service after December 31, 2014.

SEC. 1308. Repeal of credit for new qualified plug-in electric drive motor vehicles.

(a) In general.—Subpart B of part IV of subchapter A of chapter 1 is amended by striking section 30D (and by striking the item relating to such section in the table of sections for such subpart).

(b) Conforming amendments.—

(1) Section 38(b) is amended by striking paragraph (35).

(2) Section 1016(a) is amended by striking paragraph (37).

(3) Section 6501(m) is amended by striking “30D(e)(4),”.

(c) Effective date.—The amendments made by this section shall apply to vehicles acquired after December 31, 2014.

SEC. 1309. Repeal of credit for health insurance costs of eligible individuals.

(a) In general.—Subpart C of part IV of subchapter A of chapter 1 is amended by striking section 35 (and by striking the item relating to such section in the table of sections of such subpart).

(b) Conforming amendments.—

(1) Chapter 77 is amended by striking section 7527 (and by striking the item relating to such section in the table of sections of such chapter).

(2) Section 4980B(f)(5)(C)(iv)(II) is amended by inserting “as in effect before its repeal” after “section 35(c)”.

(3) Section 6211(b)(4)(A) is amended by striking “35,”.

(c) Effective date.—The amendments made by this section shall apply to months beginning after December 31, 2013.

SEC. 1310. Repeal of first-time homebuyer credit.

(a) In general.—Subpart C of part IV of subchapter A of chapter 1 is amended by striking section 36 (and by striking the item relating to such section in the table of sections of such subpart).

(b) Conforming amendments.—

(1) Section 26(b)(2) is amended by striking subparagraph (W).

(2) Section 1400C(e) is amended by striking paragraph (4).

(3) Section 6211(b)(4)(A) is amended by striking “36,”.

(4) Section 6213(g)(2) is amended by striking subparagraphs (O) and (P).

(c) Effective date.—The amendments made by this section shall apply to residences purchased after June 30, 2011.

SEC. 1401. Exclusion of gain from sale of a principal residence.

(a) Requirement that residence be principal residence for 5 years during 8-Year period.—Subsection (a) of section 121 is amended—

(1) by striking “5-year period” and inserting “8-year period”, and

(2) by striking “2 years” and inserting “5 years”.

(b) Application to only 1 sale or exchange every 5 years.—Paragraph (3) of section 121(b) is amended to read as follows:

“(3) APPLICATION TO ONLY 1 SALE OR EXCHANGE EVERY 5 YEARS.—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.”.

(c) Phaseout based on modified adjusted gross income.—Section 121 is amended by adding at the end the following new subsection:

“(h) Phaseout based on modified adjusted gross income.—

“(1) IN GENERAL.—If the modified adjusted gross income of the taxpayer for the taxable year 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.

“(2) MODIFIED ADJUSTED GROSS INCOME.—For purposes of this subsection, the term ‘modified adjusted gross income’ has the meaning given such term by section 2 determined after the application of this section but without regard to this subsection.”.

(d) Conforming amendments.—

(1) The last paragraph of section 121(b) (relating to exclusion of gain allocated to nonqualified use) is redesignated as paragraph (5).

(2) The following provisions of section 121 are each amended by striking “5-year period” each place it appears therein and inserting “8-year period”:

(A) Subsection (b)(5)(C)(ii)(I) (as redesignated by paragraph (1)).

(B) Subsection (c)(1)(B)(i)(I).

(C) Subsection (d)(7)(B).

(D) Subparagraphs (A) and (B) of subsection (d)(9).

(E) Subsection (d)(10)

(F) Subsection (d)(12)(A).

(3) Section 121(c)(1)(B)(ii) is amended by striking “2 years” and inserting “5 years”:

(e) Effective date.—The amendments made by this section shall apply to sales and exchanges after December 31, 2014.

SEC. 1402. Mortgage interest.

(a) Modification of limitations.—

(1) IN GENERAL.—Paragraph (3) of section 163(h) is amended to read as follows:

“(3) QUALIFIED RESIDENCE INTEREST.—For purposes of this subsection—

“(A) IN GENERAL.—The term ‘qualified residence interest’ means any interest which is paid or accrued during the taxable year on indebtedness which—

“(i) is incurred in acquiring, constructing, or substantially improving any qualified residence (determined as of the time the interest is accrued) of the taxpayer, and

“(ii) is secured by such residence.

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.

“(B) LIMITATION.—

“(i) IN GENERAL.—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).

“(ii) PHASE-IN OF DECREASED LIMITATION.—For purposes of applying clause (i) with respect to any indebtedness incurred during a calendar year after 2014 and before 2018, the $500,000 amount in clause (i) shall be increased by the phase-in amount determined in accordance with the following table:


“In the case of indebtedness incurred during: The phase-in amount is:
2015 $375,000
2016 $250,000
2017 $125,000

“(iii) TREATMENT OF REFINANCINGS OF INDEBTEDNESS INCURRED DURING PHASE-IN PERIOD.—In the case of any indebtedness which is incurred to refinance indebtedness to which clause (ii) applies (or to which this clause applies), such refinanced indebtedness shall be treated for purposes of clause (ii) as incurred on the date that the original indebtedness was incurred to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.

“(C) TREATMENT OF INDEBTEDNESS INCURRED BEFORE JANUARY 1, 2015.—

“(i) IN GENERAL.—In the case of any pre-January 1, 2015, indebtedness, this paragraph shall apply as in effect immediately before the enactment of the Tax Reform Act of 2014.

“(ii) REDUCTION IN DOLLAR LIMITATION.—The limitation of subparagraph (B) (after application of clause (ii) thereof) shall be reduced (but not below zero) by the aggregate amount of outstanding pre-January 1, 2015, indebtedness of the taxpayer with respect to which interest is allowable as a deduction by reason of this subparagraph.

“(iii) PRE-JANUARY 1, 2015, INDEBTEDNESS.—For purposes of this subparagraph, the term ‘pre-January 1, 2015, indebtedness’ means—

“(I) any indebtedness incurred before January 1, 2015, and

“(II) any indebtedness incurred on or after such date to refinance indebtedness described in subclause (I) (or refinanced indebtedness meeting the requirements of this subclause) to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.

“(D) LIMITATION ON PERIOD OF REFINANCING.—Subparagraphs (B)(iii) and (C)(iii)(II) shall not apply to any indebtedness after—

“(i) the expiration of the term of the original indebtedness, or

“(ii) 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).

“(E) COORDINATION WITH CERTAIN EXCLUSIONS.—The amount otherwise treated as qualified residence interest (determined without regard to this subparagraph) with respect to any residence of the taxpayer for any taxable year shall be reduced by the sum of the amounts excludable from the gross income of such taxpayer under sections 107 and 119 with respect to such residence.”.

(2) CONFORMING AMENDMENTS.—

(A) Section 108(h)(2) is amended to read as follows:

“(2) QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.—For purposes of this section, the term ‘qualified principal residence indebtedness’ means indebtedness described in section 163(h)(3) applied without regard to clauses (ii) and (iii) of subparagraph (B) thereof and by substituting ‘$2,000,000’ for ‘$500,000’ in subparagraph (B)(i) thereof.”.

(B) Section 163(h) is amended—

(i) by striking subparagraph (E) in paragraph (3),

(ii) by striking subparagraphs (E) and (F) in paragraph (4), and

(iii) by striking paragraph (5).

(C) Section 265(a)(6) is amended—

(i) by striking “an amount as—” and all that follows and inserting “an amount as a military housing allowance.”, and

(ii) by striking “parsonage and” in the heading thereof.

(b) Modification of reporting requirements.—

(1) INFORMATION RETURN REQUIREMENTS.—Paragraph (2) of section 6050H(b) is amended by striking “and” at the end of subparagraph (C), by redesignating subparagraph (D) as subparagraph (F) and by inserting after subparagraph (C) the following new subparagraphs:

“(D) the amount of outstanding principal on the mortgage as of the beginning of such calendar year,

“(E) the date of the origination of the mortgage, and”.

(2) STATEMENTS TO INDIVIDUALS.—Paragraph (2) of section 6050H(d) is amended by striking “subsection (b)(2)(C)” and inserting “subparagraphs (C), (D), and (E) of subsection (b)(2)”.

(c) Effective dates.—

(1) MODIFICATION OF LIMITATIONS.—

(A) IN GENERAL.—The amendments made by subsection (a) shall apply to interest paid or accrued in taxable years beginning after December 31, 2014, with respect to indebtedness incurred before, on, or after such date.

(B) TREATMENT OF GRANDFATHERED INDEBTEDNESS.—For application of the amendments made by subsection (a) to grandfathered indebtedness, see section 163(h)(3)(C) of the Internal Revenue Code of 1986 as amended by this section.

(2) MODIFICATION OF REPORTING REQUIREMENTS.—The amendments made by subsection (b) shall apply to returns and statements for calendar years after December 31, 2014.

SEC. 1403. Charitable contributions.

(a) 2 percent floor on charitable deduction for individuals.—Paragraph (3) of section 170(b) is amended to read as follows:

“(3) 2 PERCENT FLOOR ON CHARITABLE DEDUCTION FOR INDIVIDUALS.—The amount of charitable contributions taken into account under this section as made by any individual during a taxable year (determined without regard to subsection (d)) shall be reduced by 2 percent of the taxpayer’s contribution base for such taxable year. Such reduction shall apply—

“(A) first, to charitable contributions to which paragraph (1)(B) applies to the extent thereof,

“(B) second, to charitable contributions to which paragraph (1)(C) applies to the extent thereof, and

“(C) third, to charitable contributions to which paragraph (1)(A) applies to the extent thereof.”.

(b) Extension of time for making charitable contributions.—Subsection (a) of section 170 is amended by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively, and by inserting after paragraph (1) the following new paragraph:

“(2) TREATMENT OF CHARITABLE CONTRIBUTIONS MADE BY INDIVIDUALS BEFORE DUE DATE OF RETURN.—If any charitable contribution is made by an individual after the close of a taxable year but not later than the due date (determined without regard to extensions) for the return of tax for such taxable year, then the taxpayer may elect to treat such charitable contribution as made in such taxable year. Such election may be made only at the time of the filing of such return of tax and shall be signified in such manner as the Secretary may provide.”.

(c) Deduction for contributions of property generally limited to adjusted basis.—

(1) IN GENERAL.—Subsection (e) of section 170 is amended—

(A) by striking paragraphs (1) and (6),

(B) by redesignating paragraphs (2), (3), (4), and (5) as paragraphs (3), (4), (5), and (6), respectively, and

(C) by inserting before paragraph (3) (as so redesignated) the following new paragraphs:

“(1) IN GENERAL.—Except in the case of property to which paragraph (2) applies, the amount of any charitable contribution of property otherwise taken into account under this section shall be reduced by the amount of gain which would have been realized if the property contributed had been sold by the taxpayer for its fair market value (determined at the time of such contribution).

“(2) SPECIAL RULE FOR CERTAIN PROPERTY.—

“(A) IN GENERAL.—In the case of property to which this paragraph applies, the amount of any charitable contribution of property otherwise taken into account under this section shall be reduced by the amount of gain which would not have been long-term capital gain if the property contributed had been sold by the taxpayer at its fair market value (determined at the time of such contribution).

“(B) PROPERTY TO WHICH THIS PARAGRAPH APPLIES.—This paragraph shall apply to—

“(i) any contribution of tangible personal property if the use of such property by the donee is related to the purpose or function constituting the basis for its exemption under section 501 (or, in the case of a governmental unit, to any purpose or function described in subsection (c)),

“(ii) any qualified conservation contribution (as defined in subsection (h)(1)),

“(iii) any qualified contribution (as defined in paragraph (4)(A)),

“(iv) any qualified research contribution (as defined in paragraph (5)(B)), and

“(v) any qualified appreciated stock (as defined in subsection (e)(6)).

“(C) SPECIAL RULES FOR DETERMINING LONG-TERM CAPITAL GAIN.—

“(i) IN GENERAL.—For purposes of applying this paragraph (other than in the case of gain to which section 1245(a), 1250(a), 1252(a), or 1254(a) applies), property which is property used in the trade or business (as defined in section 1231(b)) shall be treated as a capital asset.

“(ii) CONTRIBUTIONS OF STOCK IN S CORPORATIONS.—For purposes of applying this paragraph in the case of a charitable contribution of stock in an S corporation, rules similar to the rules of section 751 shall apply in determining whether gain on such stock would have been long-term capital gain if such stock were sold by the taxpayer.”.

(2) REPEAL OF SPECIAL RULES FOR FOOD AND BOOK INVENTORY.—Paragraph (4) of section 170(e), as redesignated by paragraph (1), is amended by striking subparagraphs (C) and (D) and by redesignating subparagraph (E) as subparagraph (C).

(3) CONFORMING AMENDMENTS.—

(A) Section 170(e)(3), as redesignated by paragraph (1), is amended by striking “paragraph (1)” and inserting “paragraphs (1) and (2)”.

(B) Paragraphs (4) and (5) of section 170(e), as redesignated by paragraph (1), are each amended by striking “paragraph (1)(A)” each place it appears and inserting “paragraph (2)(A)”.

(C) Section 170(e)(6), as redesignated by paragraph (1), is amended—

(i) by striking all that precedes “for purposes of this paragraph” in subparagraph (B) and inserting the following:

“(6) QUALIFIED APPRECIATED STOCK.—

“(A) IN GENERAL.—Except as provided in subparagraph (B),”,

(ii) by redesignating subparagraph (C) as subparagraph (B), and

(iii) by striking “in a contribution to which paragraph (1)(B)(ii) applies (determined without regard to this paragraph)” in subparagraph (B) as so redesignated.

(d) Modification of income based contribution limitations.—

(1) IN GENERAL.—Section 170(b)(1) is amended—

(A) by striking “30 percent” in subparagraph (B)(i) and inserting “25 percent”, and

(B) by striking “50 percent” and inserting “40 percent” in—

(i) the flush matter at the end of subparagraph (A),

(ii) subparagraph (B)(ii), and

(iii) clauses (i), (iv)(I), and (v) of subparagraph (C) (as redesignated by paragraph (2)).

(2) REPEAL OF SPECIAL LIMITATIONS FOR CERTAIN CAPITAL GAIN PROPERTY.—

(A) IN GENERAL.—Paragraph (1) of section 170(b) is amended by striking subparagraphs (C) and (D) and by redesignating subparagraphs (E), (F), and (G) as subparagraphs (C), (D), and (E), respectively.

(B) CONFORMING AMENDMENTS.—

(i) Section 170(b)(1)(A)(vii) is amended by striking “subparagraph (F)” and inserting “subparagraph (D)”

(ii) Section 170(b)(1)(B)(ii) is amended by striking “(determined without regard to subparagraph (C))”.

(iii) Section 170(b)(1)(C)(iii), as redesignated by paragraph (1), is amended by striking “subparagraph (A), (B), (C) or (D)” and inserting “subparagraph (A) or (B)”.

(iv) Section 170(b)(2)(B)(i)(I) is amended by striking “paragraph (1)(E)(v)” and inserting “paragraph (1)(C)(v)”.

(v) Section 545(b)(2) is amended by striking “(D), and (E)” and inserting “and (C)”.

(e) Qualified conservation contributions.—

(1) RULES MADE PERMANENT.—

(A) IN GENERAL.—Subparagraph (C) of section 170(b)(1), as redesignated by subsection (d), is amended by striking clause (vi).

(B) CORPORATE FARMERS AND RANCHERS.—Subparagraph (B) of section 170(b)(2) is amended by striking clause (iii).

(2) TREATMENT OF GOLF COURSE EASEMENTS.—Subsection (h) of section 170 is amended by adding at the end the following new paragraph:

“(7) SPECIAL RULE WITH RESPECT TO GOLF COURSES.—An interest in real property shall not be treated as a qualified real property interest for purposes of this subsection if (at the time of the contribution of such interest) such property is, or is reasonably expected to be, used as a golf course.”.

(3) CONFORMING AMENDMENTS.—

(A) Section 170(b)(1)(C)(iv)(II), as redesignated by subsection (d), is amended by striking “made after the date of the enactment of this subparagraph”.

(B) Section 170(b)(2)(B)(i)(II) is amended by striking “, in the case of contributions made after the date of the enactment of this subparagraph,”.

(f) Repeal of special rule for college athletic event seating rights.—Section 170 is amended by striking subsection (l).

(g) Repeal of special rule treating donee income from intellectual property as an additional charitable contribution.—

(1) IN GENERAL.—Section 170 is amended by striking subsection (m).

(2) CONFORMING AMENDMENTS.—Section 6050L is amended—

(A) by striking subsection (b) and redesignating subsection (c) as subsection (b), and

(B) by striking “or (b)” in subsection (b) (as redesignated by subparagraph (A)).

(h) Effective date.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to contributions made in taxable years beginning after December 31, 2014.

(2) QUALIFIED CONSERVATION CONTRIBUTIONS.—The amendments made by subsection (e) shall apply to contributions made in taxable years beginning after December 31, 2013.

SEC. 1404. Denial of deduction for expenses attributable to the trade or business of being an employee.

(a) In general.—Part IX of subchapter B of chapter 1 is amended by inserting after the item relating to section 262 the following new item:

“SEC. 262A. Expenses attributable to being an employee.

“(a) In general.—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.

“(b) Exception for above-the-Line deductions.—Subsection (a) shall not apply to any deduction allowable (determined without regard to subsection (a)) in determining adjusted gross income.”.

(b) Repeal of certain above-the-Line trade and business deductions of employees.—

(1) IN GENERAL.—Paragraph (2) of section 62(a) is amended—

(A) by striking subparagraphs (B), (C), and (D), and

(B) by redesignating subparagraph (E) as subparagraph (B).

(2) CONFORMING AMENDMENTS.—

(A) Section 62 is amended by striking subsections (b) and (d) and by redesignating subsections (c) and (e) as subsections (b) and (c), respectively.

(B) Section 62(a)(20) is amended by striking “subsection (e)” and inserting “subsection (c)”.

(c) Continued exclusion of working condition fringe benefits.—Section 132(d) is amended by inserting “(determined without regard to section 262A)” after “section 162”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1405. Repeal of deduction for taxes not paid or accrued in a trade or business.

(a) In general.—Subsection (b) of section 164 is amended by striking paragraphs (5) and (6) and inserting the following new paragraph:

“(5) LIMITATION IN CASE OF INDIVIDUALS.—In the case of a taxpayer other than a corporation—

“(A) paragraphs (1) and (2) of subsection (a) 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

“(B) paragraph (3) of subsection (a) shall not apply to State and local taxes.”.

(b) Conforming amendments.—

(1) Section 164(a) is amended by striking paragraph (6).

(2) (A) Section 216(a) is amended by striking “proportionate share of—” and all that follows and inserting “proportionate share of the interest allowable as a deduction to the corporation under section 163 which is paid or incurred by the corporation on its indebtedness contracted—

“(1) in the acquisition, construction, alteration, rehabilitation, or maintenance of the houses or apartment building, or

“(2) in the acquisition of the land on which the houses (or apartment building) are situated.”.

(B) Section 216(b)(3)(B)(i) is amended—

(i) by striking “a share of such corporation’s real estate taxes described in subsection (a)(1) or” in subclause (I), and

(ii) by striking “of such taxes, or of such interest,” in subclause (II) and inserting “of such interest”.

(C) Section 216(d) is amended by striking “subsections (a)(1) and (a)(2)” and inserting “subsection (a)”.

(3) Section 274(f) is amended by striking “taxes,” in the heading thereof.

(4) Section 280A(b) is amended by striking “taxes,” in the heading thereof.

(5) Section 911(c)(3)(A)(ii) is amended—

(A) by striking “and taxes”, and

(B) by striking “or 164”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1406. Repeal of deduction for personal casualty losses.

(a) In general.—Subsection (c) of section 165 is amended by inserting “and” at the end of paragraph (1), by striking “; and” at the end of paragraph (2) and inserting a period, and by striking paragraph (3).

(b) Conforming amendments.—

(1) Section 165 is amended by striking subsections (h) and (k).

(2) Subsection (i) of section 165 is amended—

(A) in paragraph (1)—

(i) by striking “(as defined by clause (ii) of subsection (h)(3)(C))”, and

(ii) by striking “(as defined by clause (i) of such subsection)”,

(B) by striking “(as defined by subsection (h)(3)(C)(i)” in paragraph (4), and

(C) by adding at the end the following new paragraph:

“(5) FEDERALLY DECLARED DISASTER.—For purposes of this subsection—

“(A) FEDERALLY DECLARED DISASTER.—The term ‘federally declared disaster’ means any disaster subsequently determined by the President of the United States to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

“(B) DISASTER AREA.—The term ‘disaster area’ means the area so determined to warrant such assistance.”.

(3) (A) Section 165(l)(1) is amended by striking “a loss described in subsection (c)(3)” and inserting “an ordinary loss described in subsection (c)(2)”.

(B) Section 165(l) is amended—

(i) by striking paragraph (5),

(ii) by redesignating paragraphs (2), (3), and (4) as paragraphs (3), (4), and (5), respectively, and

(iii) by inserting after paragraph (1) the following new paragraph:

“(2) LIMITATIONS.—

“(A) DEPOSIT MAY NOT BE FEDERALLY INSURED.—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.

“(B) DOLLAR LIMITATION.—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.”.

(4) Section 172(b)(1)(F)(ii), prior to redesignation under title III, is amended—

(A) by striking subclause (I) and by redesignating subclauses (II) and (III) as subclauses (I) and (II), respectively, and

(B) by striking “subsection (h)(3)(C)(i)” and inserting “section 165(i)(5)”.

(5) Section 172(d)(4)(C) is amended by striking “paragraph (2) or (3) of section 165(c)” and inserting “section 165(c)(2)”.

(6) Section 274(f) is amended by striking “casualty losses,” in the heading thereof.

(7) Section 280A(b) is amended by striking “casualty losses,” in the heading thereof.

(8) 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.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1407. Limitation on wagering losses.

(a) In general.—Section 165(d) is amended by adding at the end the following: “For purposes of the preceding sentence, the term ‘losses from wagering transactions’ includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction.”.

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1408. Repeal of deduction for tax preparation expenses.

(a) In general.—Section 212 is amended by adding “or” at the end of paragraph (1), by striking “; or” at the end of paragraph (2) and inserting a period, and by striking paragraph (3).

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1409. Repeal of deduction for medical expenses.

(a) In general.—Part VII of subchapter B of chapter 1 is amended by striking section 213 (and by striking the item relating to such section in the table of sections for such part).

(b) Conforming amendments.—

(1) (A) Section 223 is amended by redesignating subsections (e), (f), (g), and (h) as subsections (f), (g), (h), and (i), respectively, and by inserting after subsection (d) the following new subsection:

“(e) Medical care.—For purposes of this section—

“(1) IN GENERAL.—The term ‘medical care’ means amounts paid—

“(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,

“(B) for transportation primarily for and essential to medical care referred to in subparagraph (A),

“(C) for qualified long-term care services (as defined in section 7702B(c)), or

“(D) 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)).

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).

“(2) AMOUNTS PAID FOR CERTAIN LODGING AWAY FROM HOME TREATED AS PAID FOR MEDICAL CARE.—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—

“(A) 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

“(B) there is no significant element of personal pleasure, recreation, or vacation in the travel away from home.

The amount taken into account under the preceding sentence shall not exceed $50 for each night for each individual.

“(3) PHYSICIAN.—The term ‘physician’ has the meaning given to such term by section 1861(r) of the Social Security Act (42 U.S.C. 1395x(r)).

“(4) CONTRACTS COVERING OTHER THAN MEDICAL CARE.—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)—

“(A) 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,

“(B) the amount taken into account as the amount paid for such insurance shall not exceed such charge, and

“(C) 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.

“(5) CERTAIN PRE-PAID CONTRACTS.—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).

“(6) COSMETIC SURGERY.—

“(A) IN GENERAL.—The term ‘medical care’ 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.

“(B) COSMETIC SURGERY DEFINED .—For purposes of this paragraph, the term ‘cosmetic surgery’ 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.

“(7) ELIGIBLE LONG-TERM CARE PREMIUMS.—

“(A) IN GENERAL.—For purposes of this section, the term ‘eligible long-term care premiums’ 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:

“In the case of an individual with an attained age before the close of the taxable year of: The limitation is:
40 or less $200
More than 40 but not more than 50 $375
More than 50 but not more than 60 $750
More than 60 but not more than 70 $2,000
More than 70 $2,500

“(B) INDEXING.—

“(i) IN GENERAL.—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.

“(ii) MEDICAL CARE COST ADJUSTMENT.—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, 2014.

“(8) CERTAIN PAYMENTS TO RELATIVES TREATED AS NOT PAID FOR MEDICAL CARE.—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—

“(A) 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

“(B) by a corporation or partnership which is related (within the meaning of section 267(b) or 707(b)) to the individual.

For purposes of this paragraph, the term ‘relative’ means an individual bearing a relationship to the individual which is described in any of subparagraphs (A) through (G) of section 7705(d)(2). This paragraph shall not apply for purposes of section 105(b) with respect to reimbursements through insurance.”.

(B) Section 72(t)(2)(D)(i)(III) is amended by striking “section 213(d)(1)(D)” and inserting “section 223(e)(1)(D)”.

(C) Section 104(a) is amended by striking “section 213(d)(1)” in the last sentence and inserting “section 223(e)(1)”.

(D) Section 105(b) is amended by striking “section 213(d)” and inserting “section 223(e)”.

(E) Section 139D is amended by striking “section 213” and inserting “section 223”.

(F) Section 162(l)(2) is amended by striking “section 213(d)(10)” and inserting “section 223(e)(7)”.

(G) Section 220(d)(2)(A) is amended by striking “section 213(d)” and inserting “section 223(e)”.

(H) Section 223(d)(2)(A) is amended by striking “section 213(d)” and inserting “subsection (e))”.

(I) Section 419A(f)(2) is amended by striking “section 213(d)” and inserting “section 223(e)”.

(J) Section 501(c)(26)(A) is amended by striking “section 213(d)” and inserting “section 223(e)”.

(K) Section 2503(e) is amended by striking “section 213(d)” and inserting “section 223(e)”.

(L) Section 4980B(c)(4)(B)(i)(I) is amended by striking “section 213(d)” and inserting “section 223(e)”.

(M) Section 6041(f) is amended by striking “section 213(d)” and inserting “section 223(e)”.

(N) Section 7702B(a)(2) is amended by striking “section 213(d)” and inserting “section 223(e)”.

(O) Section 7702B(a)(4) is amended by striking “section 213(d)(1)(D)” and inserting “section 223(e)(1)(D)”.

(P) Section 7702B(d)(5) is amended by striking “section 213(d)(10)” and inserting “section 223(e)(7)”.

(Q) Section 9832(d)(3) is amended by striking “section 213(d)” and inserting “section 223(e)”.

(2) Section 72(t)(2)(B) is amended to read as follows:

“(B) MEDICAL EXPENSES.—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—

“(i) the expenses paid by the taxpayer during the taxable year, not compensated for by insurance or otherwise, for medical care (as defined in 223(e)) of the taxpayer, his spouse, or a dependent (as defined in section 7705, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), over

“(ii) 10 percent of the taxpayer’s adjusted gross income.”.

(3) Section 105 is amended by striking subsection (f).

(4) Section 162(l) is amended by striking paragraph (3).

(5) Section 402(l) is amended by striking paragraph (7) and redesignating paragraph (8) as paragraph (7).

(6) Section 220(f) is amended by striking paragraph (6).

(7) Section 223(f) is amended by striking paragraph (6).

(8) Section 7702B(e) is amended by striking paragraph (2).

(9) Section 7705(f)(7), as redesignated by this Act, is amended by striking “sections 105(b), 132(h)(2)(B), and 213(d)(5)” and inserting “sections 105(b) and 132(h)(2)(B)”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1410. Repeal of disqualification of expenses for over-the-counter drugs under certain accounts and arrangements.

(a) HSAs.—Subparagraph (A) of section 223(d)(2) is amended by striking the last sentence.

(b) Archer MSAs.—Subparagraph (A) of section 220(d)(2) is amended by striking the last sentence.

(c) Health flexible spending arrangements and health reimbursement arrangements.—Section 106 is amended by striking subsection (f).

(d) Effective date.—The amendments made by this section shall apply to expenses incurred after December 31, 2014.

SEC. 1411. Repeal of deduction for alimony payments and corresponding inclusion in gross income.

(a) In general.—Part VII of subchapter B of chapter 1 is amended by striking section 215 (and by striking the item relating to such section in the table of sections for such part).

(b) Corresponding repeal of provisions providing for inclusion of alimony in gross income.—

(1) Subsection (a) of section 61 is amended by striking paragraph (8) and by redesignating paragraphs (9) through (15) as paragraphs (8) through (14), respectively.

(2) Part II of subchapter B of chapter 1 is amended by striking section 71 (and by striking the item relating to such section in the table of sections for such part).

(3) Subpart F of part I of subchapter J of chapter 1 is amended by striking section 682 (and by striking the item relating to such section in the table of sections for such subpart).

(c) Conforming amendments.—

(1) RELATED TO REPEAL OF SECTION 215.—

(A) Section 62(a) is amended by striking paragraph (10).

(B) Section 3402(m)(1) is amended by striking “(other than paragraph (10) thereof)”.

(2) RELATED TO REPEAL OF SECTION 71.—

(A) Section 121(d)(3) is amended—

(i) by striking “(as defined in section 71(b)(2))” in subparagraph (B), and

(ii) by adding at the end the following new subparagraph:

“(C) DIVORCE OR SEPARATION INSTRUMENT.—For purposes of this paragraph, the term ‘divorce or separation instrument’ means—

“(i) a decree of divorce or separate maintenance or a written instrument incident to such a decree,

“(ii) a written separation agreement, or

“(iii) a decree (not described in clause (i)) requiring a spouse to make payments for the support or maintenance of the other spouse.”.

(B) Section 220(f)(7) is amended by striking “subparagraph (A) of section 71(b)(2)” and inserting “clause (i) of section 121(d)(3)(C)”.

(C) Section 223(f)(7) is amended by striking “subparagraph (A) of section 71(b)(2)” and inserting “clause (i) of section 121(d)(3)(C)”.

(D) Section 382(l)(3)(B)(iii) is amended by striking “section 71(b)(2)” and inserting “section 121(d)(3)(C)”.

(E) Section 408(d)(6) is amended by striking “subparagraph (A) of section 71(b)(2)” and inserting “clause (i) of section 121(d)(3)(C)”.

(d) Effective date.—The amendments made by this section shall apply to—

(1) any divorce or separation instrument (as defined in section 71(b)(2) of the Internal Revenue Code of 1986 as in effect before the date of the enactment of this Act) executed after December 31, 2014, and

(2) any divorce or separation instrument (as so defined) executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification.

SEC. 1412. Repeal of deduction for moving expenses.

(a) In general.—Part VII of subchapter B of chapter 1 is amended by striking section 217 (and by striking the item relating to such section in the table of sections for such part).

(b) Conforming amendments.—

(1) Section 62(a) is amended by striking paragraph (15).

(2) (A) Section 132(a) is amended by striking paragraph (6).

(B) Section 82 is amended by striking “Except as provided in section 132(a)(6), there” and inserting “There”.

(3) (A) Section 132 is amended by striking subsection (g).

(B) Section 132(l) is amended by striking by striking “subsections (e) and (g)” and inserting “subsection (e)”.

(4) Section 274(m)(3) is amended by striking “(other than section 217)”.

(5) Section 3121(a) is amended by striking paragraph (11).

(6) Section 209(a) of the Social Security Act is amended by striking paragraph (9).

(7) Section 3306(b) is amended by striking paragraph (9).

(8) Section 3401(a) is amended by striking paragraph (15).

(9) Section 7872(f) is amended by striking paragraph (11).

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1413. Termination of deduction and exclusions for contributions to medical savings accounts.

(a) Termination of income tax deduction.—Section 220 is amended by adding at the end the following new subsection:

“(k) Termination.—No deduction shall be allowed under subsection (a) with respect to any taxable year beginning after December 31, 2014.”.

(b) Termination of exclusion for employer-Provided contributions.—Section 106 is amended by striking subsection (b).

(c) Conforming amendments.—

(1) Section 62(a) is amended by striking paragraph (16).

(2) Section 106(d) is amended by striking paragraph (2), by redesignating paragraph (3) as paragraph (6), and by inserting after paragraph (1) the following new paragraphs:

“(2) NO CONSTRUCTIVE RECEIPT.—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.

“(3) SPECIAL RULE FOR DEDUCTION OF EMPLOYER CONTRIBUTIONS.—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.

“(4) EMPLOYER HEALTH SAVINGS ACCOUNT CONTRIBUTION REQUIRED TO BE SHOWN ON RETURN.—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.

“(5) HEALTH SAVINGS ACCOUNT CONTRIBUTIONS NOT PART OF COBRA COVERAGE.—Paragraph (1) shall not apply for purposes of section 4980B.”.

(3) Section 223(b)(4) is amended by striking subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively.

(4) Section 3231(e) is amended by striking paragraph (10) and by redesignating paragraphs (11) and (12) as paragraphs (10) and (11), respectively.

(5) Section 3306(b) is amended by striking paragraph (17).

(6) Section 3401(a) is amended by striking paragraph (21).

(7) Chapter 43 is amended by striking section 4980E (and by striking the item relating to such section in the table of sections for such chapter).

(8) Section 4980G is amended to read as follows:

“SEC. 4980G. Failure of employer to make comparable health savings account contributions.

“(a) In general.—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.

“(b) Amount of tax.—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.

“(c) Waiver by Secretary.—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.

“(d) Employer required To make comparable health savings account contributions for all participating employees.—

“(1) IN GENERAL.—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.

“(2) COMPARABLE CONTRIBUTIONS.—

“(A) IN GENERAL.—For purposes of paragraph (1), the term ‘comparable contributions’ means contributions—

“(i) which are the same amount, or

“(ii) which are the same percentage of the annual deductible limit under the high deductible health plan covering the employees.

“(B) PART-YEAR EMPLOYEES.—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.

“(3) COMPARABLE PARTICIPATING EMPLOYEES.—

“(A) IN GENERAL.—For purposes of paragraph (1), the term ‘comparable participating employees’ means all employees—

“(i) who are eligible individuals covered under any high deductible health plan of the employer, and

“(ii) who have the same category of coverage.

“(B) CATEGORIES OF COVERAGE.—For purposes of subparagraph (B), the categories of coverage are self-only and family coverage.

“(4) PART-TIME EMPLOYEES.—

“(A) IN GENERAL .—Paragraph (3) shall be applied separately with respect to part-time employees and other employees.

“(B) PART-TIME EMPLOYEE.—For purposes of subparagraph (A), the term ‘part-time employee’ means any employee who is customarily employed for fewer than 30 hours per week.

“(5) SPECIAL RULE FOR NON-HIGHLY COMPENSATED EMPLOYEES.—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.

“(e) Controlled groups.—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.

“(f) Definitions.—Terms used in this section which are also used in section 223 have the respective meanings given such terms in section 223.

“(g) Regulations.—The Secretary shall issue regulations to carry out the purposes of this section.”.

(9) Section 6051(a) is amended by striking paragraph (11).

(10) Section 6051(a)(14)(A) is amended by striking “paragraphs (11) and (12)” and inserting “paragraph (12)”.

(d) Effective date.—The amendment made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1414. Repeal of 2-percent floor on miscellaneous itemized deductions.

(a) In general.—Part 1 of subchapter B of chapter 1 is amended by striking section 67 (and the item relating to such section in the table of sections for such part).

(b) Conforming amendments.—

(1) Section 642(b)(2)(C)(i)(II) is amended to read as follows:

“(II) by determining the adjusted gross income of the trust under the rules of section 2(b)(2) (without the reference to section 642(b)).”.

(2) Section 162(o) is amended by striking paragraph (2).

(3) Section 302(b)(5) is amended by striking “section 67(c)(2)(B)” and inserting “section 562(c)(2)”.

(4) Section 562(c) is amended—

(A) by striking “(as defined in section 67(c)(2)(B))”,

(B) by striking “(as so defined)”,

(C) by striking “Except in the case of” and inserting the following:

“(1) IN GENERAL.—Except in the case of”, and

(D) by adding at the end the following new paragraph:

“(2) PUBLICLY OFFERED REGULATED INVESTMENT COMPANY.—For purposes of this subsection—

“(A) IN GENERAL.—The term ‘publicly offered regulated investment company’ means a regulated investment company the shares of which are—

“(i) continuously offered pursuant to a public offering (within the meaning of section 4 of the Securities Act of 1933, as amended (15 U.S.C. 77a to 77aa)),

“(ii) regularly traded on an established securities market, or

“(iii) held by or for no fewer than 500 persons at all times during the taxable year.

“(B) SECRETARY MAY REDUCE 500 PERSON REQUIREMENT.—The Secretary may by regulation decrease the minimum shareholder requirement of clause (i)(III) in the case of regulated investment companies which experience a loss of shareholders through net redemptions of their shares.”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1415. Repeal of overall limitation on itemized deductions.

(a) In general.—Part 1 of subchapter B of chapter 1 is amended by striking section 68 (and the item relating to such section in the table of sections for such part).

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1416. Deduction for amortizable bond premium allowed in determining adjusted gross income.

(a) In general.—Subsection (a) of section 62, as amended by section 1411, is amended by inserting after paragraph (9) the following new paragraph:

“(10) AMORTIZABLE BOND PREMIUM.—The deduction allowed under section 171(a)(1).”.

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1417. Repeal of exclusion, etc., for employee achievement awards.

(a) In general.—Section 74 is amended by striking subsection (c).

(b) Repeal of limitation on deduction.—Section 274 is amended by striking subsection (j).

(c) Conforming amendments.—

(1) Section 102(c)(2) is amended by striking the first sentence.

(2) Section 414(n)(3)(C) is amended by striking “274(j),”.

(3) Section 414(t)(2) is amended by striking “274(j),”.

(4) Section 3121(a)(20) is amended by striking “74(c),”.

(5) Section 209(a)(17) of the Social Security Act is amended by striking “74(c),”.

(6) Section 3231(e)(5) is amended by striking “74(c),”.

(7) Section 3306(b)(16) is amended by striking “74(c),”.

(8) Section 3401(a)(19) is amended by striking “74(c),”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1418. Clarification of special rule for certain governmental plans.

(a) Treatment of beneficiaries.—Section 105(j)(1) is amended—

(1) by striking “the taxpayer” and inserting “an employee, spouse, dependent (as defined for purposes of subsection (b)), or child (as so defined)”, and

(2) by striking “deceased plan participant’s beneficiary” and inserting “deceased employee’s beneficiary who is not a surviving spouse, dependent (as so defined), or child (as so defined)”.

(b) Application to political subdivisions of States.—Section 105(j)(2) is amended—

(1) by inserting “or established by or on behalf of a State or political subdivision thereof ” after “public retirement system”, and

(2) by inserting “or 501(c)(9)” after “section 115” in subparagraph (B) thereof.

(c) Effective date.—The amendments made by this section shall apply to payments after the date of the enactment of this Act.

SEC. 1419. Limitation on exclusion for employer-provided housing.

(a) In general.—Section 119 is amended by adding at the end the following new subsection:

“(e) Limitation on exclusion of lodging.—

“(1) IN GENERAL.—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).

“(2) LIMITATION TO 1 HOME.—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.”.

(b) Effective date.—The amendment made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1420. Fringe benefits.

(a) Repeal of special rule for air transportation by parent of employee.—Subsection (h) of section 132 is amended by striking paragraph (3).

(b) Transportation and parking.—

(1) FREEZE AT CURRENT LEVELS.—

(A) IN GENERAL.—Paragraph (2) of section 132(f) is amended—

(i) in subparagraph (A) by striking “$100” and inserting “$130”, and

(ii) in subparagraph (B) by striking “$175” and inserting “$250”.

(B) INFLATION ADJUSTMENT.—Subsection (f) of such section is amended by striking paragraph (6) and redesignating paragraph (7) as paragraph (6).

(2) REPEAL OF BICYCLE BENEFIT.—

(A) IN GENERAL.—Paragraph (1) of section 132(f) is amended by striking subparagraph (D).

(B) CONFORMING AMENDMENTS.—

(i) Section 132(f)(2) is amended by inserting “and” at the end of subparagraph (A), by striking “and” at the end of subparagraph (B) and inserting a period, and by striking subparagraph (C).

(ii) Section 132(f)(4) is amended by striking “(other than a qualified bicycle commuting reimbursement)”.

(iii) Section 132(f)(5) is amended by striking subparagraph (F).

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1421. Repeal of exclusion of net unrealized appreciation in employer securities.

(a) In general.—Section 402(e) is amended by striking paragraph (4).

(b) Conforming amendments.—

(1) Section 401(k)(10) is amended by striking subparagraph (B) and inserting the following new subparagraphs:

“(B) DISTRIBUTIONS MUST BE LUMP SUM DISTRIBUTIONS.—A termination shall not be treated as described in subparagraph (A) with respect to any employee unless the employee receives a lump sum distribution by reason of the termination.

“(C) LUMP-SUM DISTRIBUTION DEFINED.—For purposes of this paragraph—

“(i) IN GENERAL.—The term ‘lump sum distribution’ means the distribution or payment within one taxable year of the recipient of the balance to the credit of an employee which becomes payable to the recipient from a trust which forms a part of a plan described in section 401(a) and which is exempt from tax under section 501 or from a plan described in section 403(a). Such term includes a distribution of an annuity contract from—

“(I) a trust which forms a part of a plan described in section 401(a) and which is exempt from tax under section 501(a), or

“(II) an annuity plan described in section 403(a).

For purposes of this clause, a distribution to two or more trusts shall be treated as a distribution to one recipient.

“(ii) AGGREGATION OF CERTAIN TRUSTS AND PLANS.—For purposes of determining the balance to the credit of an employee under clause (i)—

“(I) all trusts which are part of a plan shall be treated as a single trust, all pension plans maintained by the employer shall be treated as a single plan, all profit-sharing plans maintained by the employer shall be treated as a single plan, and all stock bonus plans maintained by the employer shall be treated as a single plan, and

“(II) trusts which are not qualified trusts under section 401(a) and annuity contracts which do not satisfy the requirements of section 404(a)(2) shall not be taken into account.

“(iii) COMMUNITY PROPERTY LAWS.—The provisions of this subparagraph shall be applied without regard to community property laws.

“(iv) BALANCE TO CREDIT OF EMPLOYEE NOT TO INCLUDE AMOUNTS PAYABLE UNDER QUALIFIED DOMESTIC RELATIONS ORDER.—The balance to the credit of an employee shall not include any amount payable to an alternate payee under a qualified domestic relations order (within the meaning of section 414(p)).

“(v) TRANSFERS TO COST-OF-LIVING ARRANGEMENT NOT TREATED AS DISTRIBUTION.—The balance to the credit of an employee under a defined contribution plan shall not include any amount transferred from such defined contribution plan to a qualified cost-of-living arrangement (within the meaning of section 415(k)(2)) under a defined benefit plan. (vii)

“(vi) LUMP-SUM DISTRIBUTIONS OF ALTERNATE PAYEES.—If any distribution or payment of the balance to the credit of an employee would be treated as a lump-sum distribution, then, for purposes of this paragraph, the payment under a qualified domestic relations order (within the meaning of section 414(p)) of the balance to the credit of an alternate payee who is the spouse or former spouse of the employee shall be treated as a lump-sum distribution. For purposes of this clause, the balance to the credit of the alternate payee shall not include any amount payable to the employee.

“(vii) EXCLUSION OF ACCUMULATE DEDUCTIBLE EMPLOYEE CONTRIBUTIONS.—For purposes of this subparagraph, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan (within the meaning of section 72(o)(5)).”.

(2) Section 3405(e) is amended by striking paragraph (8).

(c) Effective date.—The amendments made by this section shall apply to distributions after December 31, 2014.

SEC. 1422. Consistent basis reporting between estate and person acquiring property from decedent.

(a) Property acquired from a decedent.—Section 1014 is amended by adding at the end the following new subsection:

“(f) Basis must be consistent with estate tax return.—For purposes of this section—

“(1) IN GENERAL.—The basis of any property to which subsection (a) applies shall not exceed—

“(A) in the case of property the final value of which has been determined for purposes of the tax imposed by chapter 11 on the estate of such decedent, such value, and

“(B) in the case of property not described in subparagraph (A) and with respect to which a statement has been furnished under section 6035(a) identifying the value of such property, such value.

“(2) EXCEPTION.—Paragraph (1) shall only apply to any property whose inclusion in the decedent’s estate increased the liability for the tax imposed by chapter 11 (reduced by credits allowable against such tax) on such estate.

“(3) REGULATIONS.—The Secretary may by regulations provide exceptions to the application of this subsection.”.

(b) Information reporting.—

(1) IN GENERAL.—Subpart A of part III of subchapter A of chapter 61 is amended by inserting after section 6034A the following new section:

“SEC. 6035. Basis information to persons acquiring property from decedent.

“(a) Information with respect to property acquired from decedents.—

“(1) IN GENERAL.—The executor of any estate required to file a return under section 6018(a) shall furnish to the Secretary and to each person acquiring any interest in property included in the decedent’s gross estate for Federal estate tax purposes a statement identifying the value of each interest in such property as reported on such return and such other information with respect to such interest as the Secretary may prescribe.

“(2) STATEMENTS BY BENEFICIARIES.—Each person required to file a return under section 6018(b) shall furnish to the Secretary and to each other person who holds a legal or beneficial interest in the property to which such return relates a statement identifying the information described in paragraph (1).

“(3) TIME FOR FURNISHING STATEMENT.—

“(A) IN GENERAL.—Each statement required to be furnished under paragraph (1) or (2) shall be furnished at such time as the Secretary may prescribe, but in no case at a time later than the earlier of—

“(i) the date which is 30 days after the date on which the return under section 6018 was required to be filed (including extensions, if any), or

“(ii) the date which is 30 days after the date such return is filed.

“(B) ADJUSTMENTS.—In any case in which there is an adjustment to the information required to be included on a statement filed under paragraph (1) or (2) after such statement has been filed, a supplemental statement under such paragraph shall be filed not later than the date which is 30 days after such adjustment is made.

“(b) Regulations.—The Secretary shall prescribe such regulations as necessary to carry out this section, including regulations relating to—

“(1) the application of this section to property with regard to which no estate tax return is required to be filed, and

“(2) situations in which the surviving joint tenant or other recipient may have better information than the executor regarding the basis or fair market value of the property.”.

(2) PENALTY FOR FAILURE TO FILE.—

(A) RETURN.—Section 6724(d)(1) is amended by striking “and” at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting “, and”, and by adding at the end the following new subparagraph:

“(D) any statement required to be filed with the Secretary under section 6035.”.

(B) STATEMENT.—Section 6724(d)(2) is amended by striking “or” at the end of subparagraph (GG), by striking the period at the end of subparagraph (HH) and inserting “, or”, and by adding at the end the following new subparagraph:

“(II) section 6035 (other than a statement described in paragraph (1)(D)).”.

(3) CLERICAL AMENDMENT.—The table of sections for subpart A of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6034A the following new item:


“Sec. 6035. Basis information to persons acquiring property from decedent.”.

(c) Penalty for inconsistent reporting.—

(1) IN GENERAL.—Subsection (b) of section 6662 is amended by inserting after paragraph (7) the following new paragraph:

“(8) Any inconsistent estate basis.”.

(2) INCONSISTENT BASIS REPORTING.—Section 6662 is amended by adding at the end the following new subsection:

“(k) Inconsistent estate basis reporting.—For purposes of this section, the term ‘inconsistent estate basis’ means the portion of the understatement which is attributable to in the case of property acquired from a decedent, a basis determination with respect to such property which is not consistent with the value of such property as determined under section 1014(f).”.

(d) Effective date.—The amendments made by this section shall apply to transfers for which an estate tax return is filed after the date of the enactment of this Act.

SEC. 1501. Modifications of deduction for Social Security taxes in computing net earnings from self-employment.

(a) In general.—Paragraph (12) of section 1402(a) is amended to read as follows:

“(12) in lieu of the deduction allowable under section 164(f) (relating to deduction for one-half of self-employment taxes), there shall be allowed as a deduction an amount equal to the sum of—

“(A) 7.1064 percent of so much of the individual’s net earnings from self-employment for the taxable year (determined without regard to this paragraph) as does not exceed an amount equal to the product of 1.0765 and the excess (if any) of—

“(i) the contribution and benefit base (as determined under section 230 of the Social Security Act) in effect for the calendar year in which the taxable year begins, over

“(ii) the wages (within the meaning of subsection (b)(1)) paid to the individual during such taxable year, plus

“(B) 1.4293 percent of the excess (if any) of the individual’s net earnings from self-employment for the taxable year (determined without regard to this paragraph) over the amount of such net earnings taken into account under subparagraph (A);”.

(b) Coordination with benefits.—Paragraph (11) of section 211(a) of the Social Security Act is amended to read as follows:

“(11) in lieu of the deduction allowable under section 164(f) of the Internal Revenue Code of 1986 (relating to deduction for one-half of self-employment taxes), there shall be allowed as a deduction an amount equal to the sum of—

“(A) 7.1064 percent of so much of the individual's net-earnings from self-employment for the taxable year (determined without regard to this paragraph) as does not exceed an amount equal to the product of 1.0765 and the excess (if any) of—

“(i) the contribution and benefit base (as determined under section 230) in effect for the calendar year in which the taxable year begins,

“(ii) the wages (within the meaning of section 1402(b)(1) of the Internal Revenue Code of 1986) paid to the individual during such taxable year, plus

“(B) 1.4293 percent of the excess (if any) of such net earnings over the amount of such net earnings taken into account under subparagraph (A);”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1502. Determination of net earnings from self-employment.

(a) Pro rata share of S corporation items included as net earnings from self-Employment.—

(1) IN GENERAL.—Section 1402(a) is amended by inserting “, plus (notwithstanding subsection (c)(2)) his pro rata share of nonseparately computed income or loss (as defined in section 1366(a)(2)) from any trade or business carried on by an S corporation in which he is a shareholder” before “; except that” in the matter preceding paragraph (1).

(2) APPLICATION OF ADJUSTMENTS.—Section 1402(a) is amended by inserting “and such pro rata share of S corporation nonseparately computed income or loss” after “such distributive share of partnership ordinary income or loss” in the matter preceding paragraph (1).

(3) CONFORMING AMENDMENTS.—Section 211(a) of the Social Security Act is amended in the matter preceding paragraph (1)—

(A) by inserting “, plus (notwithstanding subsection (c)(2)) his pro rata share of nonseparately computed income or loss (as defined in section 1366(a)(2) of the Internal Revenue Code of 1986)from any trade or business carried on by an S corporation in which he is a shareholder” before “; except that”, and

(B) by inserting “and such pro rata share of S corporation nonseparately computed income or loss” after “such distributive share of partnership ordinary income or loss”.

(b) Repeal of exception for limited partners.—

(1) IN GENERAL.—Section 1402(a) is amended by striking paragraph (13).

(2) CONFORMING AMENDMENT.—Section 211(a) of the Social Security Act is amended by striking paragraph (12).

(c) Deduction for return on invested capital.—

(1) IN GENERAL.—Section 1402 is amended by adding at the end the following new subsection:

“(m) Deduction for return on invested capital.—

“(1) IN GENERAL.—An individual’s net earnings from self-employment shall be reduced (but not below zero) by the lesser of—

“(A) 30 percent of the sum of—

“(i) such individual’s pass-through net earnings from self-employment, and

“(ii) such individual’s wages (as defined in section 3121) paid with respect to any trade or business carried on by an S corporation in which he is a shareholder, or

“(B) such individual’s pass-through net earnings from self-employment.

“(2) PASS-THROUGH NET EARNINGS FROM SELF-EMPLOYMENT.—For purposes of this subsection, the term ‘pass-through net earnings from self-employment’ means net earnings from self-employment (as computed under subsection (a) without regard to this subsection) determined without regard to any trade or business carried on by the individual.

“(3) 100 PERCENT DEDUCTION WHERE NO MATERIAL PARTICIPATION.—

“(A) IN GENERAL.—If an individual does not have material participation with respect to an entity (as determined under subparagraph (B)), in lieu of the reduction provided under paragraph (1) such individual’s net earnings from self-employment shall be reduced (but not below zero) by the sum of—

“(i) the reduction determined under paragraph (1) applied—

“(I) by substituting ‘100 percent’ for ‘30 percent’ in subparagraph (A) thereof, and

“(II) by determining pass-through net earnings from self-employment by only taking into account distributive and pro rata shares from non-participation entities, and

“(III) by only taking into account under subparagraph (A)(ii) thereof wages paid with respect to trades or businesses carried on by S corporations which are non-participation entities, plus

“(ii) the reduction determined under paragraph (1) applied—

“(I) by determining pass-through net earnings from self-employment by not taking into account any distributive or pro rata share from a non-participation entity, and

“(II) by not taking into account under subparagraph (A)(ii) thereof any wages paid with respect to trades or businesses carried on by an S corporation which is a non-participation entity.

“(B) MATERIAL PARTICIPATION.—For purposes of this paragraph—

“(i) IN GENERAL.—An individual does not have material participation with respect to an entity (hereafter referred to as the top-tier entity) if such individual demonstrates to the satisfaction of the Secretary that such individual—

“(I) does not materially participate (as determined under section 469(h) without regard to paragraph (2) thereof) in any activity carried on by such top-tier entity, and

“(II) does not materially participate (as so determined) in any activity carried on by any entity in which such top-tier entity holds (directly or indirectly) any interest.

“(ii) FAMILY ATTRIBUTION.—For purposes of applying clause (i), the participation of any individual in any activity shall also be treated as performed by such individual’s spouse and the lineal descendants of such individual and such individual’s spouse.

“(C) NON-PARTICIPATION ENTITY.—For purposes of this paragraph, the term ‘non-participation entity’ means, with respect to any individual, any entity with respect to which such individual does not have material participation (as determined under subparagraph (B)).”.

(2) CONFORMING AMENDMENT.—Section 211 of the Social Security Act is amended by adding at the end the following new subsection:

“(l) Deduction for return on invested capital.—

“(1) IN GENERAL.—An individual’s net earnings from self-employment shall be reduced (but not below zero) by the lesser of—

“(A) 30 percent of the sum of—

“(i) such individual’s pass-through net earnings from self-employment, and

“(ii) such individual’s wages (as defined in section 209) paid with respect to any trade or business carried on by an S corporation in which he is a shareholder, or

“(B) such individual’s pass-through net earnings from self-employment.

“(2) PASS-THROUGH NET EARNINGS FROM SELF-EMPLOYMENT.—For purposes of this subsection, the term ‘pass-through net earnings from self-employment’ means net earnings from self-employment (as computed under subsection (a) without regard to this subsection) determined without regard to any trade or business carried on by the individual.

“(3) 100 PERCENT DEDUCTION WHERE NO MATERIAL PARTICIPATION.—

“(A) IN GENERAL.—If an individual does not have material participation with respect to an entity (as determined under subparagraph (B)), in lieu of the reduction provided under paragraph (1) such individual’s net earnings from self-employment shall be reduced (but not below zero) by the sum of—

“(i) the reduction determined under paragraph (1) applied—

“(I) by substituting ‘100 percent’ for ‘30 percent’ in subparagraph (A) thereof, and

“(II) by determining pass-through net earnings from self-employment by only taking into account distributive and pro rata shares from non-participation entities, and

“(III) by only taking into account under subparagraph (A)(ii) thereof wages paid with respect to trades or businesses carried on by S corporations which are non-participation entities, plus

“(ii) the reduction determined under paragraph (1) applied—

“(I) by determining pass-through net earnings from self-employment by not taking into account any distributive or pro rata share from a nonparticipation entity, and

“(II) by not taking into account under subparagraph (A)(ii) thereof any wages paid with respect to trades or businesses carried on by an S corporation which is a nonparticipation entity.

“(B) MATERIAL PARTICIPATION.—For purposes of this paragraph—

“(i) IN GENERAL.—An individual does not have material participation with respect to an entity (hereafter referred to as the top-tier entity) if such individual demonstrates to the satisfaction of the Secretary of the Treasury under section 1402(m) of the Internal Revenue Code of 1986 that such individual—

“(I) does not materially participate (as determined under section 469(h) of the Internal Revenue Code of 1986 without regard to paragraph (2) thereof) in any activity carried on by such top-tier entity, and

“(II) does not materially participate (as so determined) in any activity carried on by any entity in which such top-tier entity holds (directly or indirectly) any interest.

“(ii) FAMILY ATTRIBUTION.—For purposes of applying clause (i), the participation of any individual in any activity shall also be treated as performed by such individual’s spouse and the lineal descendants of such individual and such individual’s spouse.

“(C) NONPARTICIPATION ENTITY.—For purposes of this paragraph, the term ‘nonparticipation entity’ means, with respect to any individual, any entity with respect to which such individual does not have material participation (as determined under subparagraph (B)).”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1503. Repeal of exemption from FICA taxes for certain foreign workers.

(a) In general.—Subsection (b) of section 3121 is amended by striking paragraphs (1) and (19).

(b) Coordination with benefits.—Subsection (a) of section 210 of the Social Security Act is amended by striking paragraphs (1) and (19).

(c) Railroad retirement tax.—Paragraph (1) of section 3231(e) is amended by striking the third sentence.

(d) Effective date.—The amendments made by this section shall apply to remuneration received for services performed after December 31, 2014.

SEC. 1504. Repeal of exemption from FICA taxes for certain students.

(a) In general.—Paragraph (10) of section 3121(b) is amended—

(1) by inserting “during any calendar year” after “service performed” in the matter preceding subparagraph (A), and

(2) by inserting “, and the remuneration paid by the employer with respect to such service during such calendar year is less than the dollar amount in effect under section 213(d) of the Social Security Act (relating to amount required for a quarter of coverage) with respect to such year” before the semicolon at the end.

(b) College clubs, fraternities, and sororities.—Paragraph (2) of section 3121(b) is amended—

(1) by inserting “during any calendar year” after “domestic service performed”, and

(2) by inserting “, if the remuneration paid by the employer with respect to such service during such calendar year is less than the dollar amount in effect under section 213(d) of the Social Security Act (relating to amount required for a quarter of coverage) with respect to such year” before the semicolon at the end.

(c) Deduction of tax from wages.—Subsection (a) of section 3102 is amended by inserting “; and an employer who in any calendar year pays to an employee remuneration to which paragraph (2) or (10) of section 3121(b) is applicable may deduct an amount equivalent to such tax from any such payment of remuneration, even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar year is less than the dollar amount in effect under section 213(d) of the Social Security Act with respect to such year” before the period at the end.

(d) Coordination with benefits.—

(1) Paragraph (10) of section 210(a) of the Social Security Act is amended—

(A) by inserting “during any calendar year” after “Service performed” in the matter preceding subparagraph (A), and

(B) by inserting “, and the remuneration paid by the employer with respect to such service during such calendar year is less than the dollar amount in effect under section 213(d) (relating to amount required for a quarter of coverage) with respect to such year” before the semicolon at the end.

(2) Paragraph (2) of section 210(a) of the Social Security Act is amended—

(A) by inserting “during any calendar year” after “Domestic service performed”, and

(B) by inserting “, if the remuneration paid by the employer with respect to such service during such calendar year is less than the dollar amount in effect under section 213(d) (relating to amount required for a quarter of coverage) with respect to such year” before the semicolon at the end.

(e) Effective date.—The amendments made by this section shall apply to remuneration received for services performed after December 31, 2014.

SEC. 1505. Override of Treasury guidance providing that certain employer-provided supplemental unemployment benefits are not subject to employment taxes.

(a) In general.—Effective with respect to amounts paid after December 31, 2014—

(1) Revenue Ruling 56–249,

(2) Revenue Ruling 58–128,

(3) Revenue Ruling 60–330,

(4) so much of the holding of Revenue Ruling 77–347 as relates to Plan (1) and Plan (2),

(5) Revenue Ruling 90–72, and

(6) any other ruling, regulation, or other guidance provided by the Secretary of the Treasury, or his designee, to the extent that such ruling, regulation, or guidance provides that any payment made by an employer by reason of involuntary termination of employment shall not be treated as wages or compensation for purposes of any provision of the Internal Revenue Code of 1986,

shall be null and void. The preceding sentence shall not apply to the extent a ruling, regulation, or other guidance implements a statutory exception to wages or compensation.

(b) Repeal of withholding requirement.—

(1) IN GENERAL.—Section 3402(o)(1) is amended by striking subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively.

(2) CONFORMING AMENDMENTS.—

(A) Section 3402(o)(2) is amended by striking subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively.

(B) Section 3402(o)(5)(A) is amended by striking “paragraph (1)(C)” and inserting “paragraph (1)(B)”.

(3) EFFECTIVE DATE.—

(A) IN GENERAL.—The amendments made by this subsection shall apply to amounts paid after December 31, 2013.

(B) NO INFERENCE.—No amendment made by this subsection shall be construed to create any inference with respect to any amounts paid before January 1, 2014.

SEC. 1506. Certified professional employer organizations.

(a) Employment taxes.—Chapter 25 is amended by adding at the end the following new section:

“SEC. 3511. Certified professional employer organizations.

“(a) General rules.—For purposes of the taxes and other obligations imposed by this subtitle—

“(1) a certified professional employer organization shall be treated as the employer (and no other person shall be treated as the employer) of any work site employee performing services for any customer of such organization, but only with respect to remuneration remitted by such organization to such work site employee, and

“(2) the exemptions, exclusions, definitions, and other rules which are based on type of employer and which would (but for paragraph (1)) apply shall apply with respect to such taxes imposed on such remuneration.

“(b) Successor employer status.—For purposes of sections 3121(a)(1), 3231(e)(2)(C), and 3306(b)(1)—

“(1) a certified professional employer organization entering into a service contract with a customer with respect to a work site employee shall be treated as a successor employer and the customer shall be treated as a predecessor employer during the term of such service contract, and

“(2) a customer whose service contract with a certified professional employer organization is terminated with respect to a work site employee shall be treated as a successor employer and the certified professional employer organization shall be treated as a predecessor employer.

“(c) Liability of certified professional employer organization.—Solely for purposes of its liability for the taxes and other obligations imposed by this subtitle—

“(1) a certified professional employer organization shall be treated as the employer of any work site employee (other than a person described in subsection (e)) who is performing services covered by a contract meeting the requirements of section 7706(e)(2), but only with respect to remuneration remitted by such organization to such individual, and

“(2) exemptions, exclusions, definitions, and other rules which are based on type of employer and which would (but for paragraph (1)) apply shall apply with respect to such taxes imposed on such remuneration.

“(d) Special rule for related party.—This section shall not apply in the case of a customer which bears a relationship to a certified professional employer organization described in section 267(b) or 707(b). For purposes of the preceding sentence, such sections shall be applied by substituting ‘10 percent’ for ‘50 percent’.

“(e) Special rule for certain individuals.—For purposes of the taxes imposed under this subtitle, an individual with net earnings from self-employment derived from the customer’s trade or business (including a partner in a partnership that is a customer), is not a work site employee with respect to remuneration paid by a certified professional employer organization.

“(f) Regulations.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.”.

(b) Certified professional employer organization defined.—Chapter 79, as amended by the preceding provisions of this Act, is amended by adding at the end the following new section:

“SEC. 7706. Certified professional employer organizations.

“(a) In general.—For purposes of this title, the term ‘certified professional employer organization’ means a person who applies to be treated as a certified professional employer organization for purposes of section 3511 and who has been certified by the Secretary as meeting the requirements of subsection (b).

“(b) Certification requirements.—A person meets the requirements of this subsection if such person—

“(1) demonstrates that such person (and any owner, officer, and such other persons as may be specified in regulations) meets such requirements as the Secretary shall establish with respect to tax status, background, experience, business location, and annual financial audits,

“(2) agrees that it will satisfy the bond and independent financial review requirements of subsections (c) on an ongoing basis,

“(3) agrees that it will satisfy such reporting obligations as may be imposed by the Secretary,

“(4) computes its taxable income using an accrual method of accounting unless the Secretary approves another method,

“(5) agrees to verify on such periodic basis as the Secretary may prescribe that it continues to meet the requirements of this subsection, and

“(6) agrees to notify the Secretary in writing, within such time as the of Secretary may prescribe, of any change that materially affects the continuing accuracy of any agreement or information which was previously made or provided.

“(c) Bond and independent financial review.—

“(1) IN GENERAL.—An organization meets the requirements of this paragraph if such organization—

“(A) meets the bond requirements of paragraph (2), and

“(B) meets the independent financial review requirements of paragraph (3).

“(2) BOND.—

“(A) IN GENERAL.—A certified professional employer organization meets the requirements of this paragraph if the organization has posted a bond for the payment of taxes under subtitle C (in a form acceptable to the Secretary) that is in an amount at least equal to the amount specified in subparagraph (B).

“(B) AMOUNT OF BOND.—

“(i) IN GENERAL.—For the period April 1 of any calendar year through March 31 of the following calendar year, the amount of the bond required is equal to the greater of—

“(I) 5 percent of the organization’s liability under section 3511 for taxes imposed by subtitle C during the preceding calendar year (but not to exceed $1,000,000), or

“(II) $50,000.

“(ii) SPECIAL RULE FOR NEWLY CREATED PROFESSIONAL EMPLOYER ORGANIZATIONS.—During the first three full calendar years that an organization is in existence, subclause (I) of clause (i) shall not apply. For this purpose—

“(I) under rules provided by the Secretary, an organization is treated as in existence as of the date that such organization began providing services to any customer which were comparable to the services being provided with respect to work site employees, regardless of whether such date occurred before or after the organization is certified under subsection (b), and

“(II) an organization with liability under section 3511 for taxes imposed by subtitle C during the preceding calendar year in excess of $5,000,000 shall no longer be described in this clause (ii) as of April 1 of the year following such calendar year.

“(3) INDEPENDENT FINANCIAL REVIEW REQUIREMENTS.—A certified professional employer organization meets the requirements of this paragraph if such organization—

“(A) has, as of the most recent audit date, caused to be prepared and provided to the Secretary (in such manner as the Secretary may prescribe) an opinion of an independent certified public accountant as to whether the certified professional employer organization’s financial statements are presented fairly in accordance with generally accepted accounting principles, and

“(B) provides to the Secretary an assertion regarding Federal employment tax payments and an examination level attestation on such assertion from an independent certified public accountant not later than the last day of the second month beginning after the end of each calendar quarter. Such assertion shall state that the organization has withheld and made deposits of all taxes imposed by chapters 21, 22, and 24 of the Internal Revenue Code in accordance with regulations imposed by the Secretary for such calendar quarter and such examination level attestation shall state that such assertion is fairly stated, in all material respects.

“(4) CONTROLLED GROUP RULES.—For purposes of the requirements of paragraphs (2) and (3), all professional employer organizations that are members of a controlled group within the meaning of sections 414(b) and (c) shall be treated as a single organization.

“(5) FAILURE TO FILE ASSERTION AND ATTESTATION.—If the certified professional employer organization fails to file the assertion and attestation required by paragraph (3) with respect to any calendar quarter, then the requirements of paragraph (3) with respect to such failure shall be treated as not satisfied for the period beginning on the due date for such attestation.

“(6) AUDIT DATE.—For purposes of paragraph (3)(A), the audit date shall be six months after the completion of the organization’s fiscal year.

“(d) Suspension and revocation authority.—The Secretary may suspend or revoke a certification of any person under subsection (b) for purposes of section 3511 if the Secretary determines that such person is not satisfying the agreements or requirements of subsections (b) or (c), or fails to satisfy applicable accounting, reporting, payment, or deposit requirements.

“(e) Work site employee.—For purposes of this title—

“(1) IN GENERAL.—The term ‘work site employee’ means, with respect to a certified professional employer organization, an individual who—

“(A) performs services for a customer pursuant to a contract which is between such customer and the certified professional employer organization and which meets the requirements of paragraph (2), and

“(B) performs services at a work site meeting the requirements of paragraph (3).

“(2) SERVICE CONTRACT REQUIREMENTS.—A contract meets the requirements of this paragraph with respect to an individual performing services for a customer if such contract is in writing and provides that the certified professional employer organization shall—

“(A) assume responsibility for payment of wages to the individual, without regard to the receipt or adequacy of payment from the customer for such services,

“(B) assume responsibility for reporting, withholding, and paying any applicable taxes under subtitle C, with respect to the individual’s wages, without regard to the receipt or adequacy of payment from the customer for such services,

“(C) assume responsibility for any employee benefits which the service contract may require the certified professional employer organization to provide, without regard to the receipt or adequacy of payment from the customer for such services,

“(D) assume responsibility for hiring, firing and for recruiting workers in addition to the customer’s responsibility for recruiting, hiring, and firing workers,

“(E) maintain employee records relating to the individual, and

“(F) agree to be treated as a certified professional employer organization for purposes of section 3511 with respect to such individual.

“(3) WORK SITE COVERAGE REQUIREMENT.—The requirements of this paragraph are met with respect to an individual if at least 85 percent of the individuals performing services for the customer at the work site where such individual performs services are subject to 1 or more contracts with the certified professional employer organization which meet the requirements of paragraph (2) (but not taking into account those individuals who are excluded employees within the meaning of section 414(q)(5)).

“(f) Determination of employment status.—Except to the extent necessary for purposes of section 3511, nothing in this section shall be construed to affect the determination of who is an employee or employer for purposes of this title.

“(g) Regulations.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.”.

(c) Conforming amendments.—

(1) Section 3302 is amended by adding at the end the following new subsection:

“(h) Treatment of certified professional employer organizations.—If a certified professional employer organization (as defined in section 7706), or a customer of such organization, makes a contribution to the State’s unemployment fund with respect to a work site employee, such organization shall be eligible for the credits available under this section with respect to such contribution.”.

(2) Section 3303(a) is amended—

(A) by striking the period at the end of paragraph (3) and inserting “; and” and by inserting after paragraph (3) the following new paragraph:

“(4) if the taxpayer is a certified professional employer organization (as defined in section 7706) that is treated as the employer under section 3511, such certified professional employer organization is permitted to collect and remit, in accordance with paragraphs (1), (2), and (3), contributions during the taxable year to the State unemployment fund with respect to a work site employee.”, and

(B) in the last sentence—

(i) by striking “paragraphs (1), (2), and (3)” and inserting “paragraphs (1), (2), (3), and (4)”, and

(ii) by striking “paragraph (1), (2), or (3)” and inserting “paragraph (1), (2), (3), or (4)”.

(3) Section 6053(c) is amended by adding at the end the following new paragraph:

“(8) CERTIFIED PROFESSIONAL EMPLOYER ORGANIZATIONS.—For purposes of any report required by this subsection, in the case of a certified professional employer organization that is treated, under section 3511, as the employer of a work site employee, the customer with respect to whom a work site employee performs services shall be the employer for purposes of reporting under this section and the certified professional employer organization shall furnish to the customer any information necessary to complete such reporting no later than such time as the Secretary shall prescribe.”.

(d) Clerical amendments.—

(1) The table of sections for chapter 25 is amended by adding at the end the following new item:


“Sec. 3511. Certified professional employer organizations.”.

(2) The table of sections for chapter 79, as amended by the preceding provisions of this Act, is amended by adding at the end the following new item:


“Sec. 7706. Certified professional employer organizations.”.

(e) Reporting requirements and obligations.—The Secretary of the Treasury shall develop such reporting and recordkeeping rules, regulations, and procedures as the Secretary determines necessary or appropriate to ensure compliance with the amendments made by this section with respect to entities applying for certification as certified professional employer organizations or entities that have been so certified. Such rules shall be designed in a manner which streamlines, to the extent possible, the application of requirements of such amendments, the exchange of information between a certified professional employer organization and its customers, and the reporting and recordkeeping obligations of the certified professional employer organization.

(f) User fees.—Subsection (b) of section 7528 is amended by adding at the end thereof the following new paragraph:

“(4) CERTIFIED PROFESSIONAL EMPLOYER ORGANIZATIONS.—The fee charged under the program in connection with the certification by the Secretary of a professional employer organization under section 7706 shall be an annual fee not to exceed $1,000 per year.”.

(g) Effective dates.—

(1) IN GENERAL.—The amendments made by this section shall apply with respect to wages for services performed on or after January 1 of the first calendar year beginning more than 12 months after the date of the enactment of this Act.

(2) CERTIFICATION PROGRAM.—The Secretary of the Treasury shall establish the certification program described in section 7706(b) of the Internal Revenue Code of 1986, as added by this section, not later than 6 months before the effective date determined under paragraph (1).

(h) No inference.—Nothing contained in this section or the amendments made by this section shall be construed to create any inference with respect to the determination of who is an employee or employer—

(1) for Federal tax purposes (other than the purposes set forth in the amendments made by this section), or

(2) for purposes of any other provision of law.

SEC. 1601. ELIMINATION OF INCOME LIMITS ON CONTRIBUTIONS TO ROTH IRAs.

(a) In general.—Subsection (c) of section 408A is amended by striking paragraph (3).

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1602. NO NEW CONTRIBUTIONS TO TRADITIONAL IRAs.

(a) In general.—

(1) INDIVIDUAL RETIREMENT ACCOUNTS.—Paragraph (1) of section 408(a) is amended by striking “in excess of the amount” and all that follows through the end and inserting the following: “unless it is a contribution under a simplified employee pension described in subsection (k) not in excess of the amount of the limitation in effect for such taxable year under section 415(c)(1)(A), a contribution to a simple retirement account described in subsection (p) not in excess of the amount described in section 408(p)(8) for such taxable year, or a contribution to a Roth IRA described in section 408A not in excess of the amount in effect for the taxable year with respect to such individual under section 408A(c)(1)(A)(i).”.

(2) INDIVIDUAL RETIREMENT ANNUITIES.—

(A) IN GENERAL.—Subparagraph (B) of section 408(b)(2) is amended to read as follows:

“(B) any amount paid as a premium on behalf of any individual for a taxable year would meet the requirements of subsection (a)(1) if it were paid as a contribution to an individual retirement account, and”.

(B) ENDOWMENT CONTRACT REQUIREMENT.—The last sentence of section 408(b) is amended by striking “the dollar amount in effect under section 219(b)(1)(A)” and inserting “the amounts described in paragraph (2)(B)”.

(b) Conforming amendments.—

(1) AMENDMENTS RELATING TO DEDUCTIBILITY.—

(A) Section 219(a) is amended by striking “equal to the qualified retirement contributions of the individual” and inserting “equal to the amounts contributed on behalf of the individual to a plan described in section 501(c)(18)”.

(B) Section 219(b) is amended—

(i) by striking “Maximum amount of deduction” and all that follows through “Notwithstanding paragraph (1), the amount allowable as a deduction” and inserting “Maximum amount of deduction.—The amount allowable as a deduction”, and

(ii) by striking paragraphs (4) and (5).

(C) Section 219 is amended by striking subsections (c), (d), (e), (g), and (h) and by redesignating subsection (f) as subsection (c).

(D) Section 219(c), as so redesignated, is amended—

(i) by striking “Other definitions and special rules” and inserting “Special rules”,

(ii) by striking paragraphs (1), (3), (4), (5), (6), (7), and (8), and

(iii) by inserting before paragraph (2) the following new paragraph:

“(1) BENEFICIARY MUST BE UNDER AGE 701/2.—No deduction shall be allowed under this section with respect to any amount contributed on behalf of an individual to a plan described in section 501(c)(18) if such individual has attained age 7012 before the close of such individual’s taxable year for which the contribution was made.”.

(E) Section 4973(b)(2)(C) is amended by striking “(determined without regard to section 219(f)(6))”.

(2) AMENDMENTS RELATING TO ROTH IRA CONTRIBUTION LIMITS.—

(A) Section 408A(c), as amended by this Act, is amended—

(i) by striking paragraphs (1) and (2) and inserting the following new paragraphs:

“(1) MAXIMUM CONTRIBUTION.—

“(A) IN GENERAL.—The aggregate amount of contributions for any taxable year to all Roth IRAs maintained for the benefit of an individual shall not exceed the lesser of—

“(i) $5,500, or

“(ii) an amount equal to the compensation includible in the individual’s gross income for such taxable year.

“(B) CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS 50 OR OLDER.—In the case of an individual who has attained the age of 50 before the close of the taxable year, the amount in effect under subparagraph (A)(i) for such taxable year shall be increased by $1,000.

“(2) SPECIAL RULE FOR CERTAIN MARRIED INDIVIDUALS.—In the case of an individual to whom this paragraph applies for the taxable year, the limitation of paragraph (1) shall be equal to the lesser of—

“(A) the dollar amount in effect under paragraph (1)(A)(i) for the taxable year, or

“(B) the sum of—

“(i) the compensation includible in such individual’s gross income for the taxable year, plus

“(ii) the compensation includible in the gross income of such individual’s spouse for the taxable year reduced by—

“(I) the amount allowed as a deduction under section 219(a) to such spouse for such taxable year,

“(II) the amount of any contribution on behalf of such spouse to a Roth IRA for such taxable year.

“(3) INDIVIDUALS TO WHOM PARAGRAPH (2) APPLIES.—Paragraph (2) shall apply to any individual if—

“(A) such individual files a joint return for the taxable year, and

“(B) the amount of compensation (if any) includible in such individual’s gross income for the taxable year is less than the compensation includible in the gross income of such individual's spouse for the taxable year.”.

(ii) by striking “paragraph (2)” in paragraph (6) and inserting “paragraph (1)”,

(iii) by striking “the rule of section 219(f)(3) shall apply” in paragraph (7) and inserting the following: “a taxpayer shall be deemed to have made a contribution to a Roth IRA on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof)”, and

(iv) by adding at the end the following new paragraphs:

“(8) COMPENSATION.—For purposes of this section, the term ‘compensation’ includes earned income (as defined in section 401(c)(2)). The term ‘compensation’ does not include any amount received as a pension or annuity and does not include any amount received as deferred compensation. For purposes of this paragraph, section 401(c)(2) shall be applied as if the term trade or business for purposes of section 1402 included service described in subsection (c)(6) thereof. The term compensation includes any differential wage payment (as defined in section 3401(h)(2)).

“(9) MARRIED INDIVIDUALS.—The limitation under this subsection shall be computed separately for each individual, and this section shall be applied without regard to any community property laws.

“(10) SPECIAL RULE FOR COMPENSATION EARNED BY MEMBERS OF ARMED FORCES FOR SERVICES IN COMBAT ZONE.—For purposes of paragraphs (1)(A)(ii) and (2), the amount of compensation includible in an individual’s gross income shall be determined without regard to section 112.”.

(B) Section 408A(d)(3)(A) is amended—

(i) by inserting “and” at the end of clause (i),

(ii) by striking “, and” at the end of clause (ii) and inserting a period,

(iii) by striking clause (iii), and

(iv) by striking the last sentence.

(3) AMENDMENTS RELATING TO TRADITIONAL IRAS.—

(A) Section 408(d)(4) is amended—

(i) by striking subparagraph (B) and inserting the following:

“(B) in the case of simplified employee pension, such contribution is not excluded from gross income under section 402(h),”.

(ii) by adding at the end the following: “This paragraph shall not apply to any contribution to a simple retirement account.”.

(B) Section 408(d)(5)(A) is amended—

(i) by striking “in effect under section 219(b)(1)(A)” and inserting “in effect with respect to the taxpayer for the taxable year under section 408A(c)(1)(A)(i)”,

(ii) by striking “the amount allowable as a deduction” and all that follows through “such excess contribution.” and inserting “the amount that may be contributed under section 408A(c)(1) for the taxable year for which the contribution was made if such distribution is received after the date described in paragraph (4).”,

(iii) by adding at the end of subparagraph (A) the following: “This paragraph shall not apply to any contribution to a simple retirement account.”, and

(iv) by striking the last sentence.

(C) Section 408 is amended by striking subsection (o).

(4) AMENDMENTS RELATING TO SIMPLE RETIREMENT ACCOUNTS.—

(A) Section 408(p)(2)(D)(ii) is amended by striking “means a plan, contract” and all that follows through the period at the end and inserting the following: “means—

“(I) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),

“(II) an annuity plan described in section 403(a),

“(III) an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A)),

“(IV) an annuity contract described in section 403(b),

“(V) a simplified employee pension (within the meaning of section 408(k)),

“(VI) any simple retirement account (within the meaning of section 408(p)), or

“(VII) a trust described in section 501(c)(18).”.

(B) Section 408(p)(8) is amended to read as follows:

“(8) COORDINATION WITH MAXIMUM LIMITATION UNDER SUBSECTION (a).—In the case of a simple retirement account, for purposes of subsections (a)(1) and (b)(2), contributions may not exceed the sum of—

“(A) the dollar amount in effect under paragraph (2)(A)(ii), and

“(B) the employer contribution required under subparagraph (A)(iii) or (B)(i) of paragraph (2), whichever is applicable.”.

(5) AMENDMENTS RELATING TO SEPS.—Section 408 is amended by striking subsection (j).

(6) AMENDMENTS RELATING TO EXCISE TAX ON EXCESS CONTRIBUTIONS.—

(A) TRADITIONAL IRAS.—Subsection (b) of section 4973 is amended—

(i) by striking paragraph (1) and inserting the following:

“(1) the amounts contributed for the taxable year to the accounts or for the annuities or bonds (other than any contributions to a Roth IRA) which are not permitted contributions under subsection (a)(1) or (b)(2) of section 408, and”.

(ii) in paragraph (2)(C), by striking “the maximum amount allowable” and all that follows through “without regard to section 219(f)(6))” and inserting “the permitted contributions under subsection (a)(1) or (b)(2) of section 408 for the taxable year over the amount contributed”, and

(iii) by striking the last sentence and inserting the following: “Paragraph (2) shall be determined separately with respect to any simplified employee pension (within the meaning of section 408(k)) and any simple retirement account (within the meaning of section 408(p)).”.

(B) ROTH IRAS.—Section 4973(f) is amended by striking “sections 408A(c)(2) and (c)(3)” each place it appears and inserting “section 408A(c)(1)”.

(7) AMENDMENTS RELATING TO SAVER’S CREDIT.—Section 25B(d)(1)(A) is amended to read as follows:

“(A) the amounts—

“(i) paid in cash for the taxable year by or on behalf of an individual to all Roth IRAs maintained for such individual’s benefit, and

“(ii) contributed on behalf of the individual to a plan described in section 501(c)(18),”.

(8) OTHER CONFORMING AMENDMENTS.—

(A) Section 86(f)(3) is amended by striking “219(f)(1)” and inserting “section 408A(c)(8)”.

(B) Section 132(m)(3) is amended by striking “section 219(g)(5)” and inserting “section 408(p)(2)(D)(ii)”.

(C) (i) Section 223(d) is amended—

(I) by redesignating paragraph (4) as paragraph (7),

(II) by inserting after paragraph (3) the following new paragraphs:

“(4) RECONTRIBUTED AMOUNTS.—No deduction shall be allowed under this section with respect to a rollover contribution described in subsection (f)(5).

“(5) TIME WHEN CONTRIBUTIONS DEEMED MADE.—For purposes of this section, a taxpayer shall be deemed to have made a contribution to a health savings account on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof).

“(6) EMPLOYER PAYMENTS.—Except as provided in section 106(d), for purposes of this title, any amount paid by an employer to a health savings account shall be treated as payment of compensation to the employee (other than a self-employed individual who is an employee within the meaning of section 401(c)(1)) includible in his gross income in the taxable year for which the amount was contributed, whether or not a deduction for such payment is allowable under this section to the employee.”.

(ii) Section 223(d)(7), as so redesignated, is amended by striking subparagraphs (A), (B), and (C), and redesignating subparagraphs (D) and (E) as subparagraphs (A) and (B), respectively.

(D) Section 409A(d)(2)(A) is amended by striking “subparagraph (A) or (B) of section 219(g)(5) (without regard to subparagraph (A)(iii))” and inserting “section 408(p)(2)(D)(ii) (without regard to subclause (III) thereof)”.

(E) Section 501(c)(18)(D)(i) is amended by striking “section 219(b)(3)” and inserting “section 219(a)”.

(F) Section 877A(d)(4)(A) is amended by striking “section 219(g)(5)” and inserting “408(p)(2)(D)(ii)”.

(G) Section 6652 is amended by striking subsection (g).

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1603. Inflation adjustment for Roth IRA contributions.

(a) In general.—Subsection (c) of section 408A, as amended by this Act, is amended by adding at the end the following new paragraph:

“(11) COST-OF-LIVING ADJUSTMENT.—In the case of any taxable year beginning after 2023, the dollar amount in paragraph (1)(A)(i) shall be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) 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 ‘calendar year 2022’ for ‘calendar year 2012’ in clause (ii) thereof.

If any increase determined under the preceding sentence is not a multiple of $500, such increase shall be rounded to the next lowest multiple of $500.”.

(b) Effective date.—The amendment made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1604. Repeal of special rule permitting recharacterization of Roth IRA contributions as traditional IRA contributions.

(a) In general.—Section 408A(d) is amended by striking paragraph (6) and by redesignating paragraph (7) as paragraph (6).

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1605. Repeal of exception to 10-percent penalty for first home purchases.

(a) In general.—Section 72(t)(2) is amended by striking subparagraph (F).

(b) Roth IRAs.—Subparagraph (A) of section 408A(d)(2) is amended by inserting “or” at the end of clause (ii), and by striking “, or” at the end of clause (iii) and inserting a period, and by striking clause (iv).

(c) Conforming amendment.—

(1) Section 72(t) is amended by striking paragraph (8).

(2) Section 408A(d), as amended by this Act, is amended by striking paragraph (5) and by redesignating paragraph (6) as paragraph (5).

(d) Effective date.—The amendments made by this section shall apply to distributions after December 31, 2014.

SEC. 1611. Termination for new SEPs.

(a) In general.—

(1) Section 408(k) is amended by redesignating paragraph (9) as paragraph (10) and by inserting after paragraph (8) the following new paragraph:

“(9) TERMINATION.—This subsection shall not apply to years beginning after December 31, 2014. The preceding sentence shall not apply to any simplified employee pension of an employer if such simplified employee pension, and the terms thereof, meet the requirements of this subsection on and after such date.”.

(2) Section 402(h) is amended by adding at the end the following new paragraph:

“(4) TERMINATION.—This subsection shall not apply to any simplified employee pension the arrangement for which is established after December 31, 2014.”.

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1612. TERMINATION FOR NEW SIMPLE 401(k)s.

(a) Amendments relating to SIMPLE 401(k)s.—Section 401(k)(11) is amended by adding at the end the following new subparagraph:

“(E) TERMINATION.—This paragraph shall apply to a cash or deferred arrangement for any plan year beginning after December 31, 2014, only if such arrangement meets the requirements of this paragraph for the last plan year beginning before January 1, 2015, and for each plan year thereafter.”.

(b) Effective date.—The amendment made by this section shall apply to plan years beginning after December 31, 2014.

SEC. 1613. Rules related to designated Roth contributions.

(a) Applicable retirement plans which permit elective deferrals required To accept designated Roth contributions.—

(1) IN GENERAL.—Paragraph (30) of section 401(a) is amended—

(A) by striking “deferrals.—” and all that follows through “In the case of a trust” and inserting the following: “deferrals.—

“(A) IN GENERAL.—In the case of a trust”,

(B) by striking “unless the plan provides that” and inserting the following: “unless the plan—

“(i) provides that”,

(C) by striking the period at the end and inserting “, and”, and

(D) by adding at the end the following:

“(ii) except as provided in subparagraph (B), includes a qualified Roth contribution program (as defined in section 402A(b)).

“(B) EXCEPTION FOR CERTAIN SMALL PLANS.—Subparagraph (A)(ii) shall not apply to any plan of an eligible employer (as defined in section 408(p)(2)(C)).”.

(2) CONFORMING AMENDMENTS.—

(A) Section 402A(b)(1) is amended by striking all that follows “designated Roth contributions” and inserting a period.

(B) The heading of section 402A (and the item relating to such section in the table of sections for part I of subchapter D of chapter 1) is amended by striking “Optional treatment of elective deferrals as Roth contributions” and inserting “Designated Roth contributions”.

(b) Restriction on portion of elective deferral limitation which may apply to traditional elective deferrals.—

(1) IN GENERAL.—Subparagraph (A) of section 402(g)(1) is amended by striking “the applicable dollar amount” and inserting “50 percent (100 percent in the case of elective deferrals with respect to any plan of an eligible employer (as defined in section 408(p)(2)(C)) of the applicable dollar amount”.

(2) GOVERNMENT 457(b) PLANS.—

(A) IN GENERAL.—Subsection (b) of section 457 is amended by striking “and” at the end of paragraph (5), by redesignating paragraph (6) as paragraph (7), and by inserting after paragraph (5) the following new paragraph:

“(6) which, in the case of a plan maintained by an employer described in subsection (e)(1)(A), meets requirements similar to the requirements of section 401(a)(30), and”.

(B) CONFORMING AMENDMENT.—Section 402(g)(1)(A) is amended by inserting “and section 457(a)(1)” after “(h)(1)(B)”.

(C) CROSS-REFERENCE.—For treatment of amounts deferred under an eligible compensation plan of a governmental employer as elective deferrals, see section 1618(b)(1) of this Act.

(3) ROTH ELECTIVE DEFERRALS PERMITTED TO EXTENT OF FULL LIMITATION AMOUNT.—

(A) IN GENERAL.—Section 402A(c)(2)(A) is amended to read as follows:

“(A) the applicable dollar amount in effect under section 402(g)(1)(B) with respect to the employee for the taxable year, over”.

(B) CONFORMING AMENDMENTS.—

(i) Section 401(a)(30) is amended—

(I) by inserting “(including contributions treated as elective deferrals under section 402A(a)(1))” after “section 402(g)(3)”, and

(II) by striking “section 402(g)(1)(A)” and inserting “section 402(g)(1)(B), and that the amount of elective deferrals not included in gross income may not exceed the amount of the limitation in effect under section 402(g)(1)(A),”.

(ii) Section 402(g)(1)(C) is amended—

(I) by striking “In addition to subparagraph (A)” and inserting “For purposes of subparagraph (A)”.

(II) by striking “gross income shall not include” and all that follows through “does not exceed” and inserting “the applicable dollar amount in effect for the taxable year under subparagraph (B) shall be increased by”.

(iii) (I) So much of section 402(g)(2)(A) as precedes clause (i) is amended to read as follows:

“(A) IN GENERAL.—If an individual’s aggregate elective deferrals for a taxable year exceed the applicable dollar amount under paragraph (1) (hereinafter in this paragraph referred to as ‘excess total deferrals’) or if an individual’s aggregate elective deferrals (disregarding designated Roth contributions and simple Roth contributions) exceed the amount excludable under paragraph (1)(A) (hereinafter in this paragraph referred to as ‘excess non-Roth deferrals’)—”.

(II) Section 402(g)(2)(A)(i) is amended by striking “such excess deferrals” and inserting “such excess total deferrals or excess non-Roth deferrals”.

(III) Section 402(g)(2)(C)(ii) is amended by striking “the excess deferral” and inserting “the excess total deferral or excess non-Roth deferral”.

(IV) Section 402A(d)(2)(C) is amended by striking “excess deferral” and inserting “excess total deferral”.

(V) Section 402A(d)(3) is amended by striking “excess deferral” each place it appears and inserting “excess total deferral”.

(VI) Section 402(g)(1)(A) is amended by striking the second sentence.

(iv) Section 402A(c)(1)(A) is amended by striking “without regard to this section” and inserting “(determined without regard to this section and section 402(g))”.

(4) REPORTING BY EMPLOYERS.—Section 6051(a)(8) is amended by inserting after “(as defined in section 402A)” the following: “, and the type of plan under which amounts are deferred or contributed”.

(c) SIMPLE Roth retirement accounts permitted.—

(1) IN GENERAL.—Subsection (p) of section 408 is amended by adding at the end the following new paragraph:

“(11) ROTH CONTRIBUTIONS.—For purposes of this section—

“(A) IN GENERAL.—If a qualified salary reduction arrangement with respect to a simple retirement account includes a simple Roth contribution program, any simple Roth contribution made by an employer pursuant to such program shall be treated as an elective employer contribution, except that such contribution shall be paid to a Roth IRA and shall not be excludable from gross income.

“(B) SIMPLE ROTH CONTRIBUTION PROGRAM.—The term ‘simple Roth contribution program’ means a program under which an employee may elect to make simple Roth contributions.

“(C) SIMPLE ROTH CONTRIBUTION.—The term ‘simple Roth contribution’ means any elective employer contribution which—

“(i) is excludable from gross income of an employee without regard to this paragraph, and

“(ii) the employee designates (at such time and in such manner as the Secretary may prescribe) as not being so excludable.

“(D) LIMITATION.—In the case of an eligible employer which elects the application of this subparagraph with respect to the simple retirement accounts established pursuant to a qualified salary reduction arrangement of such employer, notwithstanding paragraph (2)(E), the applicable dollar amount for purposes of paragraph (2)(A)(ii), shall be equal to—

“(i) in the case of any such account which is not designated as a Roth IRA, 50 percent of the applicable dollar amount in effect under section 402(g)(1)(B) for the taxable year, and

“(ii) in the case of any such account which is designated as a Roth IRA, the excess (if any) of—

“(I) the applicable dollar amount in effect under section 402(g)(1)(B) for the taxable year, over

“(II) the aggregate amount of elective employer contributions to any account described in clause (i).

In the case of a simple retirement account with respect to which the application of this subparagraph is elected, the employer shall not be treated as an eligible employer for purposes of section 402(g)(1)(A), and the applicable dollar amount with respect to any eligible participant (as defined in section 414(v)) shall, notwithstanding section 414(v)(2)(B)(ii), be determined by reference to section 402(g)(1)(C).”.

(2) COORDINATION WITH MAXIMUM ROTH LIMITATION.—Subsection (c) of section 408A, as amended by this Act, is amended by adding at the end the following new paragraph:

“(12) INCREASE IN MAXIMUM LIMITATION FOR SIMPLE ROTH.—In the case of any simple retirement account, subparagraphs (A)(i) and (B) of paragraph (1) shall be applied by disregarding any contributions made to a simple retirement account and any qualified rollover contributions.”.

(3) CONFORMING AMENDMENTS.—

(A) Section 408A(f)(1) is amended by striking “or a simple retirement account”.

(B) Section 6051(a)(8), as amended by this Act, is amended by inserting after “(as defined in section 402A)” the following: “and simple Roth contributions (as defined in section 408(p)(11)(C))”.

(d) Effective date.—

(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall apply to plan years and taxable years beginning after December 31, 2014.

(2) SUBSECTION (c).—The amendments made by subsection (c) shall apply to calendar years beginning after December 31, 2014.

SEC. 1614. Modifications of required distribution rules for pension plans.

(a) In general.—Section 401(a)(9)(B) of the Internal Revenue Code of 1986 is amended to read as follows:

“(B) REQUIRED DISTRIBUTIONS WHERE EMPLOYEE DIES BEFORE ENTIRE INTEREST IS DISTRIBUTED.—

“(i) 5-YEAR GENERAL RULE.—A trust shall not constitute a qualified trust under this section unless the plan provides that, if an employee dies before the distribution of the employee's interest (whether or not such distribution has begun in accordance with subparagraph (A)), the entire interest of the employee will be distributed within 5 years after the death of such employee.

“(ii) EXCEPTION FOR ELIGIBLE DESIGNATED BENEFICIARIES.—If—

“(I) any portion of the employee's interest is payable to (or for the benefit of) an eligible designated beneficiary,

“(II) such portion will be distributed (in accordance with regulations) over the life of such eligible designated beneficiary (or over a period not extending beyond the life expectancy of such beneficiary), and

“(III) such distributions begin not later than 1 year after the date of the employee's death or such later date as the Secretary may by regulations prescribe,

then, for purposes of clause (i) and except as provided in clause (iv) or subparagraph (E)(iii), the portion referred to in subclause (I) shall be treated as distributed on the date on which such distributions begin.

“(iii) SPECIAL RULE FOR SURVIVING SPOUSE OF EMPLOYEE.—If the eligible designated beneficiary referred to in clause (ii)(I) is the surviving spouse of the employee—

“(I) the date on which the distributions are required to begin under clause (ii)(III) shall not be earlier than the date on which the employee would have attained age 7012 , and

“(II) if the surviving spouse dies before the distributions to such spouse begin, this subparagraph shall be applied as if the surviving spouse were the employee.

“(iv) RULES UPON DEATH OF ELIGIBLE DESIGNATED BENEFICIARY.—If an eligible designated beneficiary dies before the portion of an employee's interest described in clause (ii) is entirely distributed, clause (ii) shall not apply to any beneficiary of such eligible designated beneficiary and the remainder of such portion shall be distributed within 5 years after the death of such beneficiary.”.

(b) Definition of eligible designated beneficiary.—Section 401(a)(9)(E) of such Code is amended to read as follows:

“(E) DEFINITIONS AND RULES RELATING TO DESIGNATED BENEFICIARY.—For purposes of this paragraph—

“(i) DESIGNATED BENEFICIARY.—The term ‘designated beneficiary’ means any individual designated as a beneficiary by the employee.

“(ii) ELIGIBLE DESIGNATED BENEFICIARY.—The term ‘eligible designated beneficiary’ means, with respect to any employee, any designated beneficiary who, as of the date of death of the employee, is—

“(I) the surviving spouse of the employee,

“(II) subject to clause (iii), a child of the employee who has not attained age 22,

“(III) disabled (within the meaning of section 72(m)(7)),

“(IV) a chronically ill individual (within the meaning of section 7702B(c)(2), except that the requirements of subparagraph (A)(i) thereof shall only be treated as met if there is a certification that, as of such date, the period of inability described in such subparagraph with respect to the individual is an indefinite one that is reasonably expected to be lengthy in nature), or

“(V) an individual not described in any of the preceding subparagraphs who is not more than 10 years younger than the employee.

“(iii) SPECIAL RULE FOR CHILDREN.—Subject to subparagraph (F), an individual described in clause (ii)(II) shall cease to be an eligible designated beneficiary as of the date the individual attains age 22 and the requirement of subparagraph (B)(i) shall not be treated as met with respect to any remaining portion of an employee’s interest payable to the individual unless such portion is distributed within 5 years after such date.”.

(c) Required beginning date.—Section 401(a)(9)(C) of such Code is amended by adding at the end the following new clause:

“(v) EMPLOYEES BECOMING 5-PERCENT OWNERS AFTER AGE 701/2.—If an employee becomes a 5-percent owner (as defined in section 416) with respect to a plan year ending in a calendar year after the calendar year in which the employee attains age 7012 , then clause (i)(II) shall be applied by substituting the calendar year in which the employee became such an owner for the calendar year in which the employee retires.”.

(d) Effective dates.—

(1) IN GENERAL.—Except as provided in this subsection, the amendments made by this section shall apply to distributions with respect to employees who die after December 31, 2014.

(2) REQUIRED BEGINNING DATE.—The amendment made by subsection (c) shall apply to employees becoming a 5-percent owner with respect to plan years ending in calendar years beginning before, on, or after the date of the enactment of this Act, except that—

(A) if, without regard to such amendment, an employee’s required beginning date occurs before April 1, 2015, such amendment shall not result in an earlier required beginning date for such employee, and

(B) if, solely by reason of such amendment, an employee’s required beginning date would occur before April 1, 2015, such employee's required beginning date shall occur on April 1, 2015.

(3) EXCEPTION FOR CERTAIN BENEFICIARIES.—If a designated beneficiary of an employee who dies before January 1, 2015, dies after December 31, 2014—

(A) the amendments made by this section shall apply to any beneficiary of such designated beneficiary, and

(B) the designated beneficiary shall be treated as an eligible designated beneficiary for purposes of applying section 401(a)(9)(B)(iv) of such Code (as in effect after the amendments made by this section).

(4) EXCEPTION FOR CERTAIN EXISTING ANNUITY CONTRACTS.—

(A) IN GENERAL.—The amendments made by this section shall not apply to a qualified annuity which is a binding annuity contract in effect on the date of the enactment of this Act and at all times thereafter.

(B) QUALIFIED ANNUITY CONTRACT.—For purposes of this paragraph, the term “qualified annuity” means, with respect to an employee, an annuity—

(i) which is a commercial annuity (as defined in section 3405(e)(6) of such Code) or payable by a defined benefit plan,

(ii) under which the annuity payments are substantially equal periodic payments (not less frequently than annually) over the lives of such employee and a designated beneficiary (or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated beneficiary) in accordance with the regulations described in section 401(a)(9)(A)(ii) of such Code (as in effect before such amendments) and which meets the other requirements of this section 401(a)(9) of such Code (as so in effect) with respect to such payments, and

(iii) with respect to which—

(I) annuity payments to the employee have begun before January 1, 2015, and the employee has made an irrevocable election before such date as to the method and amount of the annuity payments to the employee or any designated beneficiaries, or

(II) if subclause (I) does not apply, the employee has made an irrevocable election before the date of the enactment of this Act as to the method and amount of the annuity payments to the employee or any designated beneficiaries.

SEC. 1615. Reduction in minimum age for allowable in-service distributions.

(a) In general.—Section 401(a)(36) is amended by striking “age 62” and inserting “age 5912 ”.

(b) Application to governmental section 457(b) plans.—Clause (i) of section 457(d)(1)(A) is amended by inserting “(in the case of a plan maintained by an employer described in subsection (e)(1)(A), age 5912 )” before the comma at the end.

(c) Effective date.—The amendments made by this section shall apply to distributions made after December 31, 2014.

SEC. 1616. Modification of rules governing hardship distributions.

(a) In general.—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—

(1) delete the 6-month prohibition on contributions imposed by paragraph (2) thereof, and

(2) to make any other modifications necessary to carry out the purposes of section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986.

(b) Effective date.—The revised regulations under this section shall apply to plan years beginning after December 31, 2014.

SEC. 1617. Extended rollover period for the rollover of plan loan offset amounts in certain cases.

(a) In general.—Paragraph (3) of section 402(c) is amended by adding at the end the following new subparagraph:

“(C) ROLLOVER OF CERTAIN PLAN LOAN OFFSET AMOUNTS.—

“(i) IN GENERAL.—In the case of a qualified plan loan offset amount, paragraph (1) shall not apply to any transfer of such amount made after the due date (including extensions) for filing the return of tax for the taxable year in which such amount is treated as distributed from a qualified employer plan.

“(ii) QUALIFIED PLAN LOAN OFFSET AMOUNT.—For purposes of this subparagraph, the term ‘qualified plan loan offset amount’ means a plan loan offset amount which is treated as distributed from a qualified employer plan to a participant or beneficiary solely by reason of—

“(I) the termination of the qualified employer plan, or

“(II) the failure to meet the repayment terms of the loan from such plan because of the separation from service of the participant (whether due to layoff, cessation of business, termination of employment, or otherwise).

“(iii) PLAN LOAN OFFSET AMOUNT.—For purposes of clause (ii), the term ‘plan loan offset amount’ means the amount by which the participant's accrued benefit under the plan is reduced in order to repay a loan from the plan.

“(iv) LIMITATION.—This subparagraph shall not apply to any plan loan offset amount unless such plan loan offset amount relates to a loan to which section 72(p)(1) does not apply by reason of section 72(p)(2).

“(v) QUALIFIED EMPLOYER PLAN.—For purposes of this subsection, the term ‘qualified employer plan’ has the meaning given such term by section 72(p)(4).”.

(b) Conforming amendment.—Subparagraph (A) of section 402(c)(3) is amended by striking “subparagraph (B)” and inserting “subparagraphs (B) and (C)”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1618. COORDINATION OF CONTRIBUTION LIMITATIONS FOR 403(b) PLANS AND GOVERNMENTAL 457(b) PLANS.

(a) 403(b) plans.—

(1) ELIMINATION OF SPECIAL CATCH-UP RULE.—Subsection (g) of section 402 is amended by striking paragraph (7) and by redesignating paragraph (8) as paragraph (7).

(2) ELIMINATION OF POST TERMINATION NON-ELECTIVE CONTRIBUTIONS.—Subsection (b) of section 403 is amended—

(A) in paragraph (3), by striking “for the most recent period” and all that follows through “more than five years”, and

(B) by striking paragraph (4).

(3) ELIMINATION OF INCREASED CONTRIBUTION LIMIT FOR CHURCH PLANS.—Subsection (c) of section 415 is amended by striking paragraph (7).

(4) ELIMINATION OF SEPARATE 415(c) LIMITS.—Paragraph (4) of section 415(k) is amended by striking “each employer with respect to which the participant has the control required” and inserting “the employer and each employer which is part of a controlled group or under common control”.

(b) 457(b) plans.—

(1) ELIMINATION OF SEPARATE DEFERRAL LIMIT.—Paragraph (3) of section 402(g) is amended by striking “and” at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting “, and”, and by inserting after subparagraph (D) the following new subparagraph:

“(E) any amount deferred under an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A).”.

(2) TAKEN INTO ACCOUNT UNDER LIMITATION FOR DEFINED CONTRIBUTION PLANS.—

(A) IN GENERAL.—Paragraph (2) of section 415(a) is amended by striking “or” at the end of subparagraph (B), by inserting “or” at the end of subparagraph (C), and by inserting after subparagraph (C) the following new subparagraph:

“(D) an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A),”.

(B) DEFINITION.—Paragraph (1) of section 415(k) is amended by striking “or” at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting “, or”, and by adding at the end the following new subparagraph:

“(E) an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A).”.

(3) ELIMINATION OF SPECIAL CATCH-UP RULE.—Paragraph (3) of section 457(b) is amended by inserting “, in the case of an eligible employer described in subsection (e)(1)(B),” after “which”.

(c) Conforming amendments.—

(1) Section 25B(d)(1)(B) is amended—

(A) by striking clause (ii), and

(B) by striking “the amount of—” and all that follows through “any elective deferrals” and inserting the following: “the amount of any elective deferrals”.

(2) Section 402A(e)(2) is amended—

(A) by striking “, and” and all that follows and inserting a period, and

(B) by striking “means—” and all that follows through “any elective deferral described in subparagraph (A) or (C)” and inserting the following: “means any elective deferral described in (A), (C), or (E)”.

(3) Section 457(e) is amended by striking paragraph (18).

(4) Section 414(u)(2)(C) is amended by inserting “by an eligible employer described in section 457(e)(1)(B)” after “(as defined in section 457(b))”.

(5) Section 414(v)(2)(D) is amended—

(A) by striking “clauses (i), (ii), and (iv) of”, and

(B) by striking “, and plans described in clause (iii)” and all that follows through the end and inserting a period.

(6) Section 414(v)(3)(A)(i) is amended by striking “(determined without regard to section 457(b)(3))”.

(7) Section 414(v)(6)(B) is amended by striking “subsection (u)(2)(C)” and inserting “section 402(g)(3)”.

(8) Section 414(v)(6) is amended by striking subparagraph (C).

(d) Effective date.—The amendments made by this section shall apply to plan years and taxable years beginning after December 31, 2014.

SEC. 1619. APPLICATION OF 10-PERCENT EARLY DISTRIBUTION TAX TO GOVERNMENTAL 457 PLANS.

(a) In general.—Paragraph (1) of section 72(t) is amended by inserting “or an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A),” after “section 4974(c)),”.

(b) Effective date.—The amendment made by this section shall apply to withdrawals on or after February 26, 2014.

SEC. 1620. Inflation adjustments for qualified plan benefit and contribution limitations.

(a) Defined benefit plans.—

(1) CURRENT LIMIT.—Subparagraph (A) of section 415(b)(1) is amended by striking “$160,000” and inserting “$210,000”.

(2) INFLATION ADJUSTMENT.—Section 415(d) is amended—

(A) in paragraph (1)(A)—

(i) by striking “$160,000” and inserting “$210,000”, and

(ii) by inserting “for calendar years beginning after 2023” after “subsection (b)(1)(A)”,

(B) paragraph (3)(A), by striking “July 1, 2001” and inserting “July 1, 2022”.

(b) Defined contribution plans.—

(1) CURRENT LIMIT.—Subparagraph (A) of section 415(c)(1) is amended by striking “$40,000” and inserting “$52,000”.

(2) INFLATION ADJUSTMENT.—Subsection (d) of section 415 is amended—

(A) in paragraph (1)(C)—

(i) by striking “$40,000” and inserting “$52,000”,

(ii) by inserting “for calendar years beginning after 2023” after “subsection (c)(1)(A)”,

(B) in paragraph (3)(D), by striking “July 1, 2001” and inserting “July 1, 2022”.

(c) Conforming amendments.—

(1) Section 415(b)(2) is amended by striking “$160,000” each place it appears in subparagraphs (C) and (D) and inserting “$210,000”.

(2) Section 415(b) is amended by striking “$160,000” in the fourth sentence of paragraph (7) and inserting “$210,000”.

(3) The headings for subparagraphs (C) and (D) of section 415(b)(2) are each amended by striking “$160,000” and inserting “$210,000”.

(4) The heading for subparagraph (A) of section 415(d)(3) is amended by striking “$160,000” and inserting “$210,000”.

(5) The heading for subparagraph (D) of section 415(d)(3) is amended by striking “$40,000” and inserting “$52,000”.

(6) The heading for subparagraph (A) of section 415(d)(4) is amended by striking “$160,000” and inserting “$210,000”.

(7) The heading for subparagraph (B) of section 415(d)(4) is amended by striking “$40,000” and inserting “$52,000”.

(d) Effective date.—The amendments made by this section shall apply to years ending with or within a calendar year beginning after 2014.

SEC. 1621. Inflation adjustments for qualified plan elective deferral limitations.

(a) Current limit.—Subparagraph (B) of section 402(g)(1) is amended by striking “shall be” and all that follows and inserting “is $17,500.”

(b) Inflation adjustment.—Paragraph (4) of section 402(g) is amended—

(1) by striking “December 31, 2006” and inserting “December 31, 2023”,

(2) by striking “$15,000” and inserting “$17,500”, and

(3) by striking “2005” and inserting “2022”.

(c) Effective date.—The amendments made by this section shall apply to plan years and taxable years beginning after December 31, 2014.

SEC. 1622. Inflation adjustments for SIMPLE retirement accounts.

(a) Current limit.—Clause (i) of section 408(p)(2)(E) is amended by striking “shall be” and all that follows and inserting “shall be $12,000”.

(b) Inflation adjustment.—Clause (ii) of section 408(p)(2)(E) is amended—

(1) by striking “December 31, 2005” and inserting “December 31, 2023”,

(2) by striking “$10,000” and inserting “$12,000”,

(3) by striking “2004” and inserting “2022”.

(c) Effective date.—The amendments made by this section shall apply to calendar years beginning after 2014.

SEC. 1623. Inflation adjustments for catch-up contributions for certain employer plans.

(a) Current limit.—

(1) PLANS OTHER THAN SIMPLE 401(k) AND SIMPLE RETIREMENT ACCOUNTS.—Clause (i) of section 414(v)(2)(B) is amended by striking “determined in accordance with the following table” and all that follows through the period at the end and inserting “$5,500.”.

(2) SIMPLE 401(k) AND SIMPLE RETIREMENT ACCOUNTS.—Clause (ii) of section 414(v)(2)(B) is amended by striking “determined in accordance with the following table” and all that follows through the period at the end and inserting “$2,500.”.

(b) Inflation adjustment.—Subparagraph (C) of section 414(v)(2) is amended—

(1) by striking “December 31, 2006” and inserting “December 31, 2023”,

(2) by striking “$5,000” and inserting “$5,500”, and

(3) by striking “2005” and inserting “2022”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1624. Inflation adjustments for governmental and tax-exempt organization plans.

(a) Current limit.—Subparagraph (A) of section 457(b)(2) is amended by striking “the applicable dollar amount” and inserting “$17,500”.

(b) Inflation adjustment.—Paragraph (15) of section 457(e) is amended—

(1) by striking “Applicable dollar amount.—” and all that follows through “Cost-of-living adjustments.—In the case of taxable years beginning after December 31, 2006” and inserting the following: “Cost-of-living adjustments.—In the case of taxable years beginning after December 31, 2023”,

(2) by striking “the $15,000 amount under subparagraph (A)” and inserting “the $17,500 amount under subsection (b)(2)(A)”, and

(3) by striking “2005” and inserting “2022”.

(c) Conforming amendment.—Section 457(f)(4)(A) is amended by striking “twice the applicable dollar limit determined under subsection (e)(15)” and inserting “twice the amount in effect under subsection (b)(2)(A)”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 1701. Indian general welfare benefits.

(a) In general.—Part III of subchapter B of chapter 1 is amended by inserting before section 140 the following new section:

“SEC. 139E. Indian general welfare benefits.

“(a) In general.—Gross income does not include the value of any Indian general welfare benefit.

“(b) Indian general welfare benefit.—For purposes of this section, the term ‘Indian general welfare benefit’ includes any payment made or services provided to or on behalf of a member of an Indian tribe (or any spouse or dependent of such a member) pursuant to an Indian tribal government program, but only if—

“(1) the program is administered under specified written guidelines and does not discriminate in favor of members of the governing body of the tribe, and

“(2) the benefits provided under such program—

“(A) are available to any tribal member who meets such guidelines,

“(B) are for the promotion of general welfare,

“(C) are not lavish or extravagant, and

“(D) are not compensation for services.

“(c) Definitions and special rules.—For purposes of this section—

“(1) INDIAN TRIBAL GOVERNMENT.—For purposes of this section, the term ‘Indian tribal government’ includes any agencies or instrumentalities of an Indian tribal government and any Alaska Native regional or village corporation, as defined in, or established pursuant to, the Alaska Native Claims Settlement Act (43 U.S.C. 1601, et seq.).

“(2) DEPENDENT.—The term ‘dependent’ has the meaning given such term by section 7705, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B).

“(3) LAVISH OR EXTRAVAGANT.—The Secretary shall, in consultation with the Tribal Advisory Committee (as established under section 1702 of the Tax Reform Act of 2014), establish guidelines for what constitutes lavish or extravagant benefits with respect to Indian tribal government programs.

“(4) ESTABLISHMENT OF TRIBAL GOVERNMENT PROGRAM.—A program shall not fail to be treated as an Indian tribal government program solely by reason of the program being established by tribal custom or government practice.”.

(b) Conforming amendment.—The table of sections for part III of subchapter B of chapter 1 is amended by inserting before the item relating to section 140 the following new item:


“Sec. 139E. Indian general welfare benefits.”.

(c) Effective date.—

(1) IN GENERAL.—The amendments made by this section shall apply to taxable years for which the period of limitation on refund or credit under section 6511 of the Internal Revenue Code of 1986 has not expired.

(2) ONE-YEAR WAIVER OF STATUTE OF LIMITATIONS.—If the period of limitation on a credit or refund resulting from the amendments made by subsection (a) expires before the end of the 1-year period beginning on the date of the enactment of this Act, refund or credit of such overpayment (to the extent attributable to such amendments) may, nevertheless, be made or allowed if claim therefor is filed before the close of such 1-year period.

SEC. 1702. Tribal Advisory Committee.

(a) Establishment.—The Secretary of the Treasury shall establish a Tribal Advisory Committee (hereinafter in this subsection referred to as the “Committee”).

(b) Duties.—

(1) IMPLEMENTATION.—The Committee shall advise the Secretary on matters relating to the taxation of Indians.

(2) EDUCATION AND TRAINING.—The Secretary shall, in consultation with the Committee, establish and require—

(A) training and education for internal revenue field agents who administer and enforce internal revenue laws with respect to Indian tribes on Federal Indian law and the Federal Government’s unique legal treaty and trust relationship with Indian tribal governments, and

(B) training of such internal revenue field agents, and provision of training and technical assistance to tribal financial officers, about implementation of this Act and the amendments made thereby.

(c) Membership.—

(1) IN GENERAL.—The Committee shall be composed of 7 members appointed as follows:

(A) Three members appointed by the Secretary of the Treasury.

(B) One member appointed by the Chairman, and one member appointed by the Ranking Member, of the Committee on Ways and Means of the House of Representatives.

(C) One member appointed by the Chairman, and one member appointed by the Ranking Member, of the Committee on Finance of the Senate.

(2) TERM.—

(A) IN GENERAL.—Except as provided in subparagraph (B), each member’s term shall be 4 years.

(B) INITIAL STAGGERING.—The first appointments made by the Secretary under paragraph (1)(A) shall be for a term of 2 years.

SEC. 1703. Other relief for Indian tribes.

(a) Waiver of penalties and interest.—The Secretary of the Treasury may waive any interest and penalties imposed under the Internal Revenue Code of 1986 on any Indian tribal government or member of an Indian tribe (or any spouse or dependent of such a member) to the extent such interest and penalties relate to excluding a payment or benefit from gross income under the general welfare exclusion.

(b) Definitions.—For purposes of this section—

(1) INDIAN TRIBAL GOVERNMENT.—The term “Indian tribal government” shall have the meaning given such term by section 139E of such Code, as added by this Act.

(2) INDIAN TRIBE.—The term “Indian tribe” shall have the meaning given such term by section 139D(c)(1) of such Code, as amended by this Act.

SEC. 2001. Repeal of alternative minimum tax.

(a) In general.—Subchapter A of chapter 1 is amended by striking part VI (and by striking the item relating to such part in the table of parts for subchapter A).

(b) Credit for prior year minimum tax liability.—

(1) LIMITATION.—Subsection (c) of section 53 is amended to read as follows:

“(c) Limitation.—The credit allowed 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.”.

(2) CREDITS TREATED AS REFUNDABLE.—Subsection (e) of section 53 is amended to read as follows:

“(e) Portion of credit treated as refundable.—

“(1) IN GENERAL.—In the case of any taxable year beginning in 2016, 2017, 2018, or 2019, the limitation under subsection (c) shall be increased by the AMT refundable credit amount for such year.

“(2) AMT REFUNDABLE CREDIT AMOUNT.—For purposes of paragraph (1), the AMT refundable credit amount is an amount equal to 50 percent (100 percent in the case of a taxable year beginning in 2019) of the excess (if any) of—

“(A) the minimum tax credit determined under subsection (b) for the taxable year, over

“(B) the minimum tax credit allowed under subsection (a) for such year (before the application of this subsection for such year).

“(3) CREDIT REFUNDABLE.—For purposes of this title (other than this section), the credit allowed by reason of this subsection shall be treated as a credit allowed under subpart C (and not this subpart).

“(4) SHORT TAXABLE YEARS.—In the case of any taxable year of less than 365 days, the AMT refundable credit amount determined under paragraph (2) with respect to such taxable year shall be the amount which bears the same ratio to such amount determined without regard to this paragraph as the number of days in such taxable year bears to 365.”.

(3) TREATMENT OF REFERENCES.—Section 53(d) is amended by adding at the end the following new paragraph:

“(3) AMT TERM REFERENCES.—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 Tax Reform Act of 2014”..”.

(4) REPEAL OF SPECIAL RULES WITH RESPECT TO TREATMENT OF INCENTIVE STOCK OPTIONS.—Section 53 is amended by striking subsection (f).

(c) Conforming amendments related to AMT repeal.—

(1) Section 2(e), as redesignated by section 1001, is amended by striking “sections 1 and 55” and inserting “section 1”.

(2) Section 5(a) is amended by striking paragraph (4).

(3) Section 11(d) is amended by striking “the taxes imposed by subsection (a) and section 55” and inserting “the tax imposed by subsection (a)”.

(4) Section 13, as redesignated by title I, is amended by striking paragraph (7).

(5) Section 26(a) is amended to read as follows:

“(a) Limitation based on amount of tax.—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.”.

(6) Section 26(b)(2) is amended by striking subparagraph (A).

(7) Section 26 is amended by striking subsection (c).

(8) Section 38(c) is amended—

(A) by striking paragraphs (1) through (5),

(B) by redesignating paragraph (6) as paragraph (2),

(C) by inserting before paragraph (2) (as so redesignated) the following new paragraph:

“(1) IN GENERAL.—The credit allowed under subsection (a) for any taxable year shall not exceed the excess of—

“(A) the sum of—

“(i) so much of the regular tax liability as does not exceed $25,000, plus

“(ii) 75 percent of so much of the regular tax liability as exceeds $25,000, over

“(B) the sum of the credits allowable under subparts A and B of this part.”, and

(D) by striking “subparagraph (B) of paragraph (1)” each place it appears in paragraph (2) (as so redesignated) and inserting “clauses (i) and (ii) of paragraph (1)(A)”.

(9) Section 45D(g)(4)(B) is amended by striking “or for purposes of section 55”.

(10) Section 54(c)(1) is amended to read as follows:

“(1) regular tax liability (as defined in section 26(b)), over”.

(11) Section 54A(c)(1)(A) is amended to read as follows:

“(A) regular tax liability (as defined in section 26(b)), over”.

(12) (A) Section 108(b)(2) is amended by striking subparagraph (C) and by redesignating subparagraphs (D) through (G) as subparagraphs (C) through (F), respectively.

(B) Section 108(b)(3)(B) is amended—

(i) by striking “subparagraphs (B), (C), and (G)” and inserting “subparagraphs (B) and (F) of paragraph (2)”, and

(ii) by striking “subparagraph (F)” and inserting “paragraph (2)(E)”.

(C) Section 108(b)(4)(B) is amended by striking “subparagraph (A) or (D)” in the heading and text thereof and inserting “subparagraph (A) or (C)”.

(D) Section 108(b)(4)(C) is amended by striking “subparagraphs (B) and (G)” in the heading and text thereof and inserting “subparagraphs (B) and (F)”.

(13) Section 168(k)(2) is amended by striking subparagraph (G).

(14) Section 173 is amended by striking subsection (b).

(15) Section 174(f) is amended to read as follows:

“(f) Cross reference.—For adjustments to basis of property for amounts allowed as deductions as deferred expenses under subsection (b), see section 1016(a)(14).”.

(16) Section 263A(c) is amended by striking paragraph (6).

(17) Section 382(l) is amended by striking paragraph (7) and by redesignating paragraph (8) as paragraph (7).

(18) Section 443 (relating to returns for a period of less than 12 months) adjustment in computing minimum tax and tax preferences) is amended by striking subsection (d) and by redesignating subsection (e) as subsection (d).

(19) Section 641(c) is amended—

(A) in paragraph (2) by striking subparagraph (B) and by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively, and

(B) in paragraph (3), by striking “paragraph (2)(C)” and inserting “paragraph (2)(B)”.

(20) Subsections (b) and (c) of section 666 are each amended by striking “(other than the tax imposed by section 55)”.

(21) Section 815(c)(2) is amended by striking the last sentence.

(22) Section 847 is amended—

(A) by striking the last sentence of paragraph (9), and

(B) in paragraph (10), by inserting “and” at the end of subparagraph (A), by striking subparagraph (B), and by redesignating subparagraph (C) as subparagraph (B).

(23) Section 848 is amended by striking subsection (i) and by redesignating subsection (j) as subsection (i).

(24) Section 860E(a) is amended by striking paragraph (4).

(25) Section 871(b)(1) is amended by striking “or 55”.

(26) Section 882(a)(1) is amended by striking “55,”.

(27) Section 897(a) is amended to read as follows:

“(a) Treatment as effectively connected with united states trade or business.—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—

“(1) in the case of a nonresident alien individual, under section 871(b)(1), or

“(2) in the case of a foreign corporation, under section 882(a)(1), 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.”.

(28) Section 904(k) is amended to read as follows:

“(k) Cross reference.—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).”.

(29) Section 911(f) is amended to read as follows:

“(f) Determination of tax liability.—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—

“(1) 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

“(2) 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.”.

(30) Section 962(a)(1) is amended—

(A) by striking “sections 1 and 55” and inserting “section 1”, and

(B) by striking “sections 11 and 55” and inserting “section 11”.

(31) Section 1016(a) is amended by striking paragraph (20).

(32) Section 1202(a)(4) is amended by inserting “and” at the end of subparagraph (A), by striking “, and” and inserting a period at the end of subparagraph (B), and by striking subparagraph (C).

(33) Section 1374(b)(3)(B) is amended by striking the last sentence thereof.

(34) Section 1397E(c)(1) is amended to read as follows:

“(1) regular tax liability (as defined in section 26(b), over”.

(35) Section 1561(a) is amended—

(A) by inserting “and” at the end of paragraph (1), by striking the comma at the end of paragraph (2) and inserting a period, and by striking paragraphs (3) and (4), and

(B) by striking the last sentence.

(36) Section 6015(d)(2)(B) is amended by striking “or 55”.

(37) Section 6425(c)(1)(A) is amended—

(A) by adding “plus” at the end of clause (i), and

(B) by striking clause (ii) and by redesignating clause (iii) as clause (ii).

(38) Section 6654(d)(2) is amended—

(A) in clause (i) of subparagraph (B), by striking “, alternative minimum taxable income,”, and

(B) in clause (i) of subparagraph (C), by striking “, alternative minimum taxable income,”.

(39) Section 6655(e)(2)(B) is amended—

(A) by striking “The taxable income, alternative minimum taxable income, and modified alternative taxable income shall” and inserting “Taxable income shall”, and

(B) by striking clause (iii).

(40) Section 6655(g)(1)(A) is amended—

(A) by striking clause (ii), and

(B) by redesignating clauses (iii) and (iv) as clauses (ii) and (iii), respectively.

(41) Section 6662(e)(3)(C) is amended by striking “the regular tax (as defined in section 55(c))” and inserting “the regular tax liability (as defined in section 26(b))”.

(d) Effective dates.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2014.

(2) PRIOR ELECTIONS WITH RESPECT TO CERTAIN TAX PREFERENCES.—So much of the amendment made by subsection (a) as relates to the repeal of section 59(e) of the Internal Revenue Code of 1986 shall apply to amounts paid or incurred after December 31, 2014.

(3) TREATMENT OF NET OPERATING LOSS CARRYBACKS.—For purposes of section 56(d) 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, 2014, to taxable years beginning before January 1, 2015, shall be determined without regard to any adjustments under section 56(d)(2)(A) of such Code (as so in effect).

SEC. 3001. 25-percent corporate tax rate.

(a) In general.—Subsection (b) of section 11 is amended to read as follows:

“(b) Amount of tax.—

“(1) IN GENERAL.—Except as provided in paragraph (2), the amount of the tax imposed by subsection (a) shall be 25 percent of taxable income.

“(2) PHASE-IN FOR TAXABLE YEARS BEGINNING BEFORE 2019.—

“(A) IN GENERAL.—In the case of taxable years beginning before 2019, the amount of tax imposed by subsection (a) shall be the sum of—

“(i) 25 percent of so much of the taxable income as does not exceed $75,000, and

“(ii) the applicable percentage of so much of taxable income as exceeds $75,000.

“(B) APPLICABLE PERCENTAGE.—For purposes of this paragraph, the applicable percentage shall be determined in accordance with the following table:


“In the case of taxable years beginning during calendar year The applicable percentage is:
2015 33%
2016 31%
2017 29%
2018 27%”.

(b) Conforming amendments.—

(1) Paragraphs (2)(B) and (6)(A)(ii) of section 860E(e) are each amended by striking “section 11(b)(1)” and inserting “section 11(b)”.

(2) (A) Part I of subchapter P of chapter 1 is amended by striking section 1201 (and by striking the item relating to such section in the table of sections for such part).

(B) Section 13, as amended and redesignated by the preceding provisions of this Act, is amended by striking paragraphs (4) and (6), and by redesignating paragraph (5) as paragraph (4).

(C) Section 527(b) is amended—

(i) by striking paragraph (2), and

(ii) by striking all that precedes “is hereby imposed” and inserting:

“(b) Tax imposed.—A tax”.

(D) Sections 594(a) is amended by striking “taxes imposed by section 11 or 1201(a)” and inserting “tax imposed by section 11”.

(E) Section 691(c)(4) is amended by striking “1201,”.

(F) Section 801(a) is amended—

(i) by striking paragraph (2), and

(ii) by striking all that precedes “is hereby imposed” and inserting:

“(a) Tax imposed.—A tax”.

(G) Section 831(d) is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.

(H) Sections 832(c)(5) and 834(b)(1)(D) are each amended by striking “sec. 1201 and following,”.

(I) Section 852(b)(3)(A) is amended by striking “section 1201(a)” and inserting “section 11(b)”.

(J) Section 857(b)(3) is amended—

(i) by striking subparagraph (A) and redesignating subparagraphs (B) through (F) as subparagraphs (A) through (E), respectively,

(ii) in subparagraph (C), as so redesignated—

(I) by striking “subparagraph (A)(ii)” in clause (i) thereof and inserting “paragraph (1)”,

(II) by striking “the tax imposed by subparagraph (A)(ii)” in clauses (ii) and (iv) thereof and inserting “the tax imposed by paragraph (1) on undistributed capital gain”,

(iii) in subparagraph (E), as so redesignated, by striking “subparagraph (B) or (D)” and inserting “subparagraph (A) or (C)”, and

(iv) by adding at the end the following new subparagraph:

“(F) UNDISTRIBUTED CAPITAL GAIN.—For purposes of this paragraph, the term ‘undistributed capital gain’ means the excess of the net capital gain over the deduction for dividends paid (as defined in section 561) determined with reference to capital gain dividends only.”.

(K) Section 882(a)(1) is amended by striking “, or 1201(a)”.

(L) Section 1374(b) is amended by striking paragraph (4).

(M) Section 1381(b) is amended by striking “taxes imposed by section 11 or 1201” and inserting “tax imposed by section 11”.

(N) Sections 6425(c)(1)(A)(i) and 6655(g)(1)(A)(i) are each amended by striking “or 1201(a),”.

(3) (A) Section 1445(e)(1) is amended—

(i) by striking “35 percent” and inserting “the highest rate of tax in effect for the taxable year under section 11(b)”, and

(ii) by striking “of the gain” and inserting “multiplied by the gain”.

(B) Section 1445(e)(2) is amended by striking “35 percent of the amount” and inserting “the highest rate of tax in effect for the taxable year under section 11(b) multiplied by the amount”.

(C) Section 1445(e)(6) is amended—

(i) by striking “35 percent” and inserting “the highest rate of tax in effect for the taxable year under section 11(b)”, and

(ii) by striking “of the amount” and inserting “multiplied by the amount”.

(D) Section 1446(b)(2)(B) is amended by striking “section 11(b)(1)” and inserting “section 11(b)”.

(4) Section 852(b)(1) is amended by striking the last sentence.

(5) (A) Part I of subchapter B of chapter 5 is amended by striking section 1551 (and by striking the item relating to such section in the table of sections for such part).

(B) Section 535(c)(5) is amended to read as follows:

“(5) CROSS REFERENCE.—For limitation on credit provided in paragraph (2) or (3) in the case of certain controlled corporations, see section 1561.”.

(6) (A) Section 1561, as amended by the preceding provisions of this Act, is amended to read as follows:

“SEC. 1561. Limitation on accumulated earnings credit in the case of certain controlled corporations.

“(a) In general.—The component members of a controlled group of corporations on a December 31 shall, for their taxable years which include such December 31, be limited for purposes of this subtitle to one $250,000 ($150,000 if any component member is a corporation described in section 535(c)(2)(B)) amount for purposes of computing the accumulated earnings credit under section 535(c)(2) and (3). Such amount shall be divided equally among the component members of such group on such December 31 unless the Secretary prescribes regulations permitting an unequal allocation of such amount.

“(b) Certain short taxable years.—If a corporation has a short taxable year which does not include a December 31 and is a component member of a controlled group of corporations with respect to such taxable year, then for purposes of this subtitle, the amount to be used in computing the accumulated earnings credit under section 535(c)(2) and (3) of such corporation for such taxable year shall be the amount specified in subsection (a) with respect to such group, divided by the number of corporations which are component members of such group on the last day of such taxable year. For purposes of the preceding sentence, section 1563(b) shall be applied as if such last day were substituted for December 31.”.

(B) The table of sections for part II of subchapter B of chapter 5 is amended by striking the item relating to section 1561 and inserting the following new item:


“Sec. 1561. Limitation on accumulated earnings credit in the case of certain controlled corporations.”.

(7) Section 7874(e)(1)(B) is amended by striking “section 11(b)(1)” and inserting “section 11(b)”.

(c) Effective date.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2014.

(2) WITHHOLDING.—The amendments made by subsection (b)(3) shall apply to distributions made after December 31, 2014.

(3) CERTAIN TRANSFERS.—The amendments made by subsection (b)(5) shall apply to transfers made after December 31, 2018.

(4) CERTAIN OTHER AMENDMENTS RELATED TO SINGLE RATE OF TAX.—The amendments made by paragraphs (4) and (6) of subsection (b) shall apply to taxable years beginning after December 31, 2018.

SEC. 3101. Revision of treatment of contributions to capital.

(a) Inclusion of contributions to capital.—Part II of subchapter B of chapter 1 is amended by inserting after section 75 the following new section:

“SEC. 76. Contributions to capital.

“(a) In general.—Gross income includes—

“(1) any contribution to the capital of any entity, and

“(2) any premium received by such entity with respect to any option on any interest in such entity.

“(b) Treatment of contributions in exchange for stock, etc.—

“(1) IN GENERAL.—In the case of any contribution of money or other property to a corporation in exchange for stock of such corporation—

“(A) 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

“(B) no gain or loss shall be recognized to such corporation upon the issuance of such stock.

“(2) TREATMENT LIMITED TO VALUE OF STOCK.—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.

“(3) APPLICATION TO ENTITIES OTHER THAN CORPORATIONS.—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.

“(c) Treasury stock treated as stock.—Any reference in this section to stock shall be treated as including a reference to treasury stock.”.

(b) Basis of corporation in contributed property.—

(1) CONTRIBUTIONS TO CAPITAL.—Subsection (c) of section 362 is amended to read as follows:

“(c) Contributions to capital.—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—

“(1) the basis determined in the hands of the transferor, increased by the amount of gain recognized to the transferor on such transfer, or

“(2) the amount included in gross income by such corporation under section 76 with respect to such contribution.”.

(2) CONTRIBUTIONS IN EXCHANGE FOR STOCK.—Paragraph (2) of section 362(a) is amended by striking “contribution to capital” and inserting “contribution in exchange for stock of such corporation (determined under rules similar to the rules of paragraphs (2) and (3) of section 76(b))”.

(c) Conforming amendments.—

(1) Section 108(e) is amended by striking paragraph (6).

(2) Part III of subchapter B of chapter 1 is amended by striking section 118 (and by striking the item relating to such section in the table of sections for such part).

(3) The table of sections for part II of subchapter B of chapter 1 is amended by inserting after the item relating to section 75 the following new item:


“Sec. 76. Contributions to capital.”.

(d) Effective date.—The amendments made by this section shall apply to contributions made, and transactions entered into, after the date of the enactment of this Act.

SEC. 3102. Repeal of deduction for local lobbying expenses.

(a) In general.—Section 162(e) is amended by striking paragraphs (2) and (7) and by redesignating paragraphs (3), (4), (5), (6), and (8) as paragraphs (2), (3), (4), (5), and (6), respectively.

(b) Conforming amendment.—Section 6033(e)(1)(B)(ii) is amended by striking “section 162(e)(5)(B)(ii)” and inserting “section 162(e)(4)(B)(ii)”.

(c) Effective date.—The amendments made by this section shall apply to amounts paid or incurred after December 31, 2014.

SEC. 3103. Expenditures for repairs in connection with casualty losses.

(a) In general.—Section 165, as amended by the preceding provisions of this Act, is amended by inserting after subsection (g) the following new subsection:

“(h) Special rule for casualty losses.—

“(1) EXPENDITURES FOR REPAIRS IN CONNECTION WITH CASUALTY LOSSES.—If a deduction is allowable under this section for any casualty loss with respect to any property, any expenditure made for any repair of damage to such property in connection with such casualty loss shall be treated as a permanent improvement made to increase the value of such property for purposes of section 263(a)(1).

“(2) ELECTION TO EXPENSE REPAIR IN LIEU OF DEDUCTING CASUALTY LOSS.—If the taxpayer elects the application of this paragraph with respect to any property with respect to which there is a casualty loss, no deduction shall be allowable under this section for the casualty loss with respect to such property and paragraph (1) shall not apply to expenditures made for repair of damage to such property in connection with such casualty loss. Any election under this paragraph shall be made not later than the due date for the return of tax (including extensions) for the taxable year in which the casualty loss occurs and, once made, may be revoked only with the consent of the Secretary.”.

(b) Effective date.—The amendment made by this section shall apply to losses sustained after December 31, 2014.

SEC. 3104. Reform of accelerated cost recovery system.

(a) Applicable depreciation method.—Subsection (b) of section 168 is amended to read as follows:

“(b) Applicable depreciation method.—For purposes of this section—

“(1) IN GENERAL.—The applicable depreciation method is the straight line method.

“(2) SALVAGE VALUE TREATED AS ZERO.—Salvage value shall be treated as zero.”.

(b) Applicable recovery period.—Subsection (c) of section 168 is amended to read as follows:

“(c) Applicable recovery period.—For purposes of this section—

“(1) IN GENERAL.—Except as provided in paragraph (2), the applicable recovery period for any property is the class life of such property.

“(2) SPECIAL RULES FOR DETERMINING CLASS LIFE OF CERTAIN PROPERTY.—

“(A) PROPERTY WITH NO CLASS LIFE.—In the case of personal property with no class life, the recovery period is 12 years.

“(B) CERTAIN HORSES.—In the case of any race horse, and any horse other than a race horse which is more than 12 years old at the time it is placed in service, 3 years.

“(C) SEMI-CONDUCTOR MANUFACTURING EQUIPMENT.—In the case of any semi-conductor manufacturing equipment, the recovery period is 5 years.

“(D) QUALIFIED TECHNOLOGICAL EQUIPMENT.—In the case of any qualified technological equipment, the recovery period is 5 years.

“(E) AUTOMOBILE OR LIGHT GENERAL PURPOSE TRUCK.—In the case of any automobile or light general purpose truck, the recovery period is 5 years.

“(F) QUALIFIED RENT-TO-OWN PROPERTY.—In the case of any qualified rent-to-own property, the recovery period is 9 years.

“(G) CERTAIN TELEPHONE SWITCHING EQUIPMENT.—In the case of any computer-based telephone central office switching equipment, the recovery period is 9.5 years.

“(H) RAILROAD TRACK.—In the case of any railroad track, the recovery period is 10 years.

“(I) SMART ELECTRIC DISTRIBUTION PROPERTY.—In the case of qualified smart electric meters and qualified smart electric grid systems, the recovery period is 10 years.

“(J) AIRPLANES.—In the case of any fixed-wing aircraft (including any fixed-wing airframe or engine), the recovery period is 12 years.

“(K) NATURAL GAS GATHERING LINE.—In the case of any natural gas gathering line, the recovery period is 14 years.

“(L) TREE OR VINE BEARING FRUIT OR NUTS.—In the case of any tree or vine bearing fruit or nuts, the recovery period is 20 years.

“(M) TELEPHONE DISTRIBUTION PLANT.—In the case of any telephone distribution plant and comparable equipment used for 2-way exchange of voice and data communications by cable, the recovery period is 24 years.

“(N) REAL PROPERTY.—In the case of nonresidential real property, residential rental property, and any section 1245 property (as defined in section 1245(a)(3)) which is real property with no class life, the recovery period is 40 years.

“(O) WATER TREATMENT AND UTILITY PROPERTY.—In the case of any municipal wastewater treatment plant or water utility property, the recovery period is 50 years.

“(P) CLEARING AND GRADING IMPROVEMENTS; TUNNEL BORE.—In the case of any clearing and grading land improvements or tunnel bore, the recovery period is 50 years.

“(Q) TAX-EXEMPT USE PROPERTY SUBJECT TO LEASE.—In the case of any tax-exempt use property subject to a lease, the recovery period used for purposes of paragraph (2) shall (notwithstanding any other subparagraph of this paragraph) in no event be less than 125 percent of the lease term.”.

(c) Neutral cost recovery system.—Section 168, as amended by subsection (f), is amended by adding at the end the following new subsection:

“(i) Neutral cost recovery system.—

“(1) IN GENERAL.—In the case of any property (to which this section applies) placed in service by the taxpayer in a taxable year for which such taxpayer has elected the application of this subsection, the deduction determined under subsection (a) with respect to such property for any taxable year shall be increased by an amount equal to the product of—

“(A) the modified adjusted basis of such property determined as of the close of such taxable year (determined without regard to this subsection but after taking all other adjustments for such taxable year into account), multiplied by

“(B) the inflation adjustment percentage for the calendar year in which such taxable year begins.

“(2) MODIFIED ADJUSTED BASIS.—For purposes of this subsection, the term ‘modified adjusted basis’ means, with respect to any property, the adjusted basis which would be determined with respect to such property if this subsection never applied to such property.

“(3) INFLATION ADJUSTMENT PERCENTAGE.—For purposes of this subsection, the term ‘inflation adjustment percentage’ means, with respect to any calendar year, the cost-of-living adjustment which would be determined under section 1(c)(2)(A) for such calendar year if clause (ii) thereof were applied by substituting ‘the C-CPI-U for the calendar year preceding the calendar year referred to in clause (i)’ for ‘the normalized CPI for calendar year 2012’.

“(4) INCREASE FOR FIRST TAXABLE YEAR REDUCED TO TAKE INTO ACCOUNT PLACED IN SERVICE CONVENTION.—In the case of the taxable year in which any property is placed in service, the increase determined under paragraph (1) with respect to such property shall be equal to—

“(A) in the case of any property to which subsection (d)(3) applies, 18 of the amount of such increase determined without regard to this paragraph, and

“(B) in the case of any other property, 12 of the amount of such increase determined without regard to this paragraph.

“(5) OVERALL DEPRECIATION ALLOWANCE NOT TO EXCEED BASIS.—The deduction determined under subsection (a) (after any increase determined under this subsection) with respect to any property for any taxable year shall not exceed the adjusted basis of such property determined as of the beginning of such taxable year.

“(6) CERTAIN PROPERTY EXCLUDED.—Paragraph (1) shall not apply to any specified property used outside the United States or to any property described in subsection (d)(2).

“(7) ELECTION.—

“(A) IN GENERAL.—An election under paragraph (1) for any taxable year shall be made not later than the due date (including extensions) for the return of tax for such taxable year. Such election, once made, shall be irrevocable. Such election shall apply with respect to all property placed in service during the taxable for which made (and shall apply for subsequent taxable years but only with respect to such property).

“(B) TAXPAYER ENGAGED IN MORE THAN ONE BUSINESS.—A taxpayer engaged in more than one trade or business may make separate elections under paragraph (1) with respect to each such trade or business.”.

(d) Application of mid-Month convention.—

(1) IN GENERAL.—Subparagraphs (A), (B) and (C) of section 168(d)(2) are amended to read as follows:

“(A) real property,

“(B) water treatment and utility property, and

“(C) any clearing and grading land improvements or tunnel bore,”.

(2) CONFORMING AMENDMENT.—Clause (i) of section 168(d)(3)(B) is amended to read as follows:

“(i) any property described in paragraph (2),”.

(e) Definitions.—Subsection (e) of section 168 is amended to read as follows:

“(e) Definitions.—For purposes of this section—

“(1) CLASS LIFE.—

“(A) IN GENERAL.—Except as provided in this section, the term ‘class life’ means the class life (if any) which would be applicable with respect to any property as of January 1, 1986, under subsection (m) of section 167 (determined without regard to paragraph (4) and as if the taxpayer had made an election under such subsection). The reference in this paragraph to subsection (m) of section 167 shall be treated as a reference to such subsection as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990.

“(B) SECRETARIAL AUTHORITY TO MODIFY REV. PROC. 87–56.—

“(i) IN GENERAL.—The Secretary, through the Office of Tax Analysis and in consultation with the Bureau of Economic Analysis of the Department of Commerce, shall—

“(I) determine, and develop a schedule of, the economic depreciation of the major categories of depreciable property (other than property with a specified class life under subsection (c)(2)) to approximate constant straight-line depreciation, and

“(II) develop recommendations regarding the proper economic depreciation for property with a specified class life under subsection (c)(2).

“(ii) REPORT.—Not later than December 31, 2017, the Secretary shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate—

“(I) the schedule developed under clause (i)(I), and

“(II) the recommendations developed under clause (i)(II).

The schedule developed under clause (i)(I) shall take effect with respect to property placed in service after the later of December 31, 2017, or the end of the first calendar year ending after the calendar year during which such schedule is submitted.

“(2) RESIDENTIAL RENTAL PROPERTY.—

“(A) IN GENERAL.—The term ‘residential rental property’ means any building or structure if 80 percent or more of the gross rental income from such building or structure for the taxable year is rental income from dwelling units.

“(B) DWELLING UNIT.—For purposes of subparagraph (A)—

“(i) the term ‘dwelling unit’ means a house or apartment used to provide living accommodations in a building or structure, but does not include a unit in a hotel, motel, or other establishment more than one-half of the units in which are used on a transient basis, and

“(ii) if any portion of the building or structure is occupied by the taxpayer, the gross rental income from such building or structure shall include the rental value of the portion so occupied.

“(3) NONRESIDENTIAL REAL PROPERTY.—The term ‘nonresidential real property’ means section 1250 property which is not—

“(A) residential rental property, or

“(B) property with a class life of less than 27.5 years.

“(4) WATER UTILITY PROPERTY.—The term ‘water utility property’ means property—

“(A) which is an integral part of the gathering, treatment, or commercial distribution of water, and

“(B) any municipal sewer.

“(5) QUALIFIED RENT-TO-OWN PROPERTY.—

“(A) IN GENERAL.—The term ‘qualified rent-to-own property’ means any property held by a rent-to-own dealer for purposes of being subject to a rent-to-own contract.

“(B) RENT-TO-OWN DEALER.—The term ‘rent-to-own dealer’ means a person that, in the ordinary course of business, regularly enters into rent-to-own contracts with customers for the use of consumer property, if a substantial portion of those contracts terminate and the property is returned to such person before the receipt of all payments required to transfer ownership of the property from such person to the customer.

“(C) CONSUMER PROPERTY.—The term ‘consumer property’ means tangible personal property of a type generally used within the home for personal use.

“(D) RENT-TO-OWN CONTRACT.—The term ‘rent-to-own contract’ means any lease for the use of consumer property between a rent-to-own dealer and a customer who is an individual which—

“(i) is titled ‘Rent-to-Own Agreement’ or ‘Lease Agreement with Ownership Option’, or uses other similar language,

“(ii) provides for level (or decreasing where no payment is less than 40 percent of the largest payment), regular periodic payments (for a payment period which is a week or month),

“(iii) provides that legal title to such property remains with the rent-to-own dealer until the customer makes all the payments described in clause (ii) or early purchase payments required under the contract to acquire legal title to the item of property,

“(iv) provides a beginning date and a maximum period of time for which the contract may be in effect that does not exceed 156 weeks or 36 months from such beginning date (including renewals or options to extend),

“(v) provides for payments within the 156-week or 36-month period that, in the aggregate, generally exceed the normal retail price of the consumer property plus interest,

“(vi) provides for payments under the contract that, in the aggregate, do not exceed $10,000 per item of consumer property,

“(vii) provides that the customer does not have any legal obligation to make all the payments referred to in clause (ii) set forth under the contract, and that at the end of each payment period the customer may either continue to use the consumer property by making the payment for the next payment period or return such property to the rent-to-own dealer in good working order, in which case the customer does not incur any further obligations under the contract and is not entitled to a return of any payments previously made under the contract, and

“(viii) provides that the customer has no right to sell, sublease, mortgage, pawn, pledge, encumber, or otherwise dispose of the consumer property until all the payments stated in the contract have been made.

“(6) QUALIFIED TECHNOLOGICAL EQUIPMENT.—

“(A) IN GENERAL.—The term ‘qualified technological equipment’ means—

“(i) any computer or peripheral equipment,

“(ii) any high technology telephone station equipment installed on the customer’s premises, and

“(iii) any high technology medical equipment.

“(B) COMPUTER OR PERIPHERAL EQUIPMENT DEFINED.—For purposes of this paragraph—

“(i) IN GENERAL.—The term ‘computer or peripheral equipment’ means—

“(I) any computer, and

“(II) any related peripheral equipment.

“(ii) COMPUTER.—The term ‘computer’ means a programmable electronically activated device which—

“(I) is capable of accepting information, applying prescribed processes to the information, and supplying the results of these processes with or without human intervention, and

“(II) consists of a central processing unit containing extensive storage, logic, arithmetic, and control capabilities.

“(C) HIGH TECHNOLOGY MEDICAL EQUIPMENT.—For purposes of this paragraph, the term ‘high technology medical equipment’ means any electronic, electromechanical, or computer-based high technology equipment used in the screening, monitoring, observation, diagnosis, or treatment of patients in a laboratory, medical, or hospital environment.

“(7) NATURAL GAS GATHERING LINE.—The term ‘natural gas gathering line’ means—

“(A) the pipe, equipment, and appurtenances determined to be a gathering line by the Federal Energy Regulatory Commission, and

“(B) the pipe, equipment, and appurtenances used to deliver natural gas from the wellhead or a commonpoint to the point at which such gas first reaches—

“(i) a gas processing plant,

“(ii) an interconnection with a transmission pipeline for which a certificate as an interstate transmission pipeline has been issued by the Federal Energy Regulatory Commission,

“(iii) an interconnection with an intrastate transmission pipeline, or

“(iv) a direct interconnection with a local distribution company, a gas storage facility, or an industrial consumer.

“(8) QUALIFIED SMART ELECTRIC METERS.—

“(A) IN GENERAL.—The term ‘qualified smart electric meter’ means any smart electric meter which—

“(i) is placed in service by a taxpayer that is a supplier of electric energy or a provider of electric energy services, and

“(ii) does not have a class life (determined without regard to subsection (c)) of less than 10 years.

“(B) SMART ELECTRIC METER.—For purposes of subparagraph (A), the term ‘smart electric meter’ means any time-based meter and related communication equipment which is capable of being used by the taxpayer as part of a system that—

“(i) measures and records electricity usage data on a time-differentiated basis in at least 24 separate time segments per day,

“(ii) provides for the exchange of information between supplier or provider and the customer’s electric meter in support of time-based rates or other forms of demand response,

“(iii) provides data to such supplier or provider so that the supplier or provider can provide energy usage information to customers electronically, and

“(iv) provides net metering.

“(9) QUALIFIED SMART ELECTRIC GRID SYSTEMS.—

“(A) IN GENERAL.—The term ‘qualified smart electric grid system’ means any smart grid property which—

“(i) is used as part of a system for electric distribution grid communications, monitoring, and management placed in service by a taxpayer who is a supplier of electric energy or a provider of electric energy services, and

“(ii) does not have a class life (determined without regard to subsection (c)) of less than 10 years.

“(B) SMART GRID PROPERTY.—For the purposes of subparagraph (A), the term ‘smart grid property’ means electronics and related equipment that is capable of—

“(i) sensing, collecting, and monitoring data of or from all portions of a utility’s electric distribution grid,

“(ii) providing real-time, two-way communications to monitor or manage such grid, and

“(iii) providing real time analysis of and event prediction based upon collected data that can be used to improve electric distribution system reliability, quality, and performance.

“(10) SPECIFIED PROPERTY USED OUTSIDE THE UNITED STATES.—

“(A) IN GENERAL.—The term ‘specified property used outside the United States’ means—

“(i) any aircraft which is registered by the Administrator of the Federal Aviation Agency and which is operated to and from the United States or is operated under contract with the United States,

“(ii) rolling stock which is used within and without the United States and which is—

“(I) of a rail carrier subject to part A of subtitle IV of title 49, or

“(II) of a United States person (other than a corporation described in subclause (I)) but only if the rolling stock is not leased to one or more foreign persons for periods aggregating more than 12 months in any 24-month period,

“(iii) any vessel documented under the laws of the United States which is operated in the foreign or domestic commerce of the United States,

“(iv) any motor vehicle of a United States person (as defined in section 7701(a)(30)) which is operated to and from the United States,

“(v) any container of a United States person which is used in the transportation of property to and from the United States,

“(vi) any property (other than a vessel or an aircraft) of a United States person which is used for the purpose of exploring for, developing, removing, or transporting resources from the outer Continental Shelf (within the meaning of section 2 of the Outer Continental Shelf Lands Act, as amended and supplemented (43 U.S.C. 1331)),

“(vii) any property which is owned by a domestic corporation or by a United States citizen (other than a citizen entitled to the benefits of section 931 or 933) and which is used predominantly in a possession of the United States by such a corporation, or such a citizen, or by a corporation created or organized in, or under the law of, a possession of the United States,

“(viii) any communications satellite (as defined in section 103(3) of the Communications Satellite Act of 1962, 47 U.S.C. 702(3)), or any interest therein, of a United States person,

“(ix) any cable, or any interest therein, of a domestic corporation engaged in furnishing telephone service to which section 168(e)(10)(C) applies (or of a wholly owned domestic subsidiary of such a corporation), if such cable is part of a submarine cable system which constitutes part of a communication link exclusively between the United States and one or more foreign countries,

“(x) any property (other than a vessel or an aircraft) of a United States person which is used in international or territorial waters within the northern portion of the Western Hemisphere for the purpose of exploring for, developing, removing, or transporting resources from ocean waters or deposits under such waters,

“(xi) any property described in section 48(l)(3)(A)(ix) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) which is owned by a United States person and which is used in international or territorial waters to generate energy for use in the United States, and

“(xii) any satellite (not described in clause (viii)) or other spacecraft (or any interest therein) held by a United States person if such satellite or other spacecraft was launched from within the United States.

“(B) NORTHERN PORTION OF THE WESTERN HEMISPHERE.—For purposes of subparagraph (A)(x), the term ‘northern portion of the Western Hemisphere’ means the area lying west of the 30th meridian west of Greenwich, east of the international dateline, and north of the Equator, but not including any foreign country which is a country of South America.”.

(f) Conforming amendments.—

(1) AMENDMENTS TO SECTION 168.—

(A) Section 168 is amended by striking subsections (g), (j), (k), (l), (m), and (n), and by redesignating subsections (h) and (i) as subsections (g) and (h), respectively.

(B) Section 168(h), as redesignated by subparagraph (A), is amended—

(i) by striking paragraphs (1), (2), (11), (12), (13), (14), (15), (16), (17), (18), and (19) and by redesignating paragraphs (3) through (10) as paragraphs (1) through (8), respectively, and

(ii) by striking “Definitions and” in the heading thereof.

(C) Section 168(h)(8), as redesignated by subparagraphs (A) and (B), is moved to the end of section 168(e) (as amended by subsection (e)) and redesignated as paragraph (11).

(2) OTHER CONFORMING AMENDMENTS.—

(A) Section 50(b)(4) is amended—

(i) in subparagraph (A)(ii)—

(I) by striking “section 168(h)(2)(C)” and inserting “section 168(g)(2)(C)”,

(II) by striking “section 168(h)(2)(A)(iii)” and inserting “section 168(g)(2)(A)(iii)”, and

(III) by striking “section 168(h)(2)(B)” and inserting “section 168(g)(2)(B)”,

(ii) in subparagraph (B), by striking “section 168(i)(3)” and inserting “section 168(h)(1)”, and

(iii) in subparagraphs (D) and (E), by striking “section 168(h)” each place it appears and inserting “section 168(g)”.

(B) (i) Section 50(b)(1)(B) is amended by striking “any property described in section 168(g)(4)” and inserting “any specified property used outside the United States (as defined in section 168(e)(10)”.

(ii) Section 865(c)(3)(B) is amended by striking “property of a kind described in section 168(g)(4)” and inserting “specified property used outside the United States (as defined in section 168(e)(10)”.

(C) Section 179(e)(2) is amended by inserting “as in effect before its repeal by the Tax Reform Act of 2014” after “section 168(n)(2)”.

(D) Section 179(f), as amended by section 3111, is amended—

(i) by striking paragraph (2), and

(ii) by inserting after paragraph (1) the following new paragraphs:

“(2) QUALIFIED REAL PROPERTY.—For purposes of this subsection, the term ‘qualified real property’ means qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property.

“(3) QUALIFIED LEASEHOLD IMPROVEMENT PROPERTY.—For purposes of this subsection—

“(A) IN GENERAL.—The term ‘qualified leasehold improvement property’ means any improvement to an interior portion of a building which is nonresidential real property if—

“(i) such improvement is made under or pursuant to a lease (as defined in section 168(g)(7))—

“(I) by the lessee (or any sublessee) of such portion, or

“(II) by the lessor of such portion,

“(ii) such portion is to be occupied exclusively by the lessee (or any sublessee) of such portion, and

“(iii) such improvement is placed in service more than 3 years after the date the building was first placed in service.

“(B) CERTAIN IMPROVEMENTS NOT INCLUDED.—Such term shall not include any improvement for which the expenditure is attributable to—

“(i) the enlargement of the building,

“(ii) any elevator or escalator,

“(iii) any structural component benefitting a common area, and

“(iv) the internal structural framework of the building.

“(C) DEFINITIONS AND SPECIAL RULES.—For purposes of this paragraph—

“(i) COMMITMENT TO LEASE TREATED AS LEASE.—A commitment to enter into a lease shall be treated as a lease, and the parties to such commitment shall be treated as lessor and lessee, respectively.

“(ii) RELATED PERSONS.—A lease between related persons shall not be considered a lease. For purposes of the preceding sentence, the term ‘related persons’ means—

“(I) members of an affiliated group (as defined in section 1504), and

“(II) persons having a relationship described in subsection (b) of section 267; except that, for purposes of this subclause, the phrase ‘80 percent or more’ shall be substituted for the phrase ‘more than 50 percent’ each place it appears in such subsection.

“(D) IMPROVEMENTS MADE BY LESSOR.—In the case of an improvement made by the person who was the lessor of such improvement when such improvement was placed in service, such improvement shall be qualified leasehold improvement property (if at all) only so long as such improvement is held by such person.

“(E) EXCEPTION FOR CHANGES IN FORM OF BUSINESS.—Property shall not cease to be qualified leasehold improvement property by reason of—

“(i) death,

“(ii) a transaction to which section 381(a) applies,

“(iii) a mere change in the form of conducting the trade or business so long as the property is retained in such trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in such trade or business,

“(iv) the acquisition of such property in an exchange described in section 1031 (as in effect before its repeal by the Tax Reform Act of 2014), 1033, or 1038 to the extent that the basis of such property includes an amount representing the adjusted basis of other property owned by the taxpayer or a related person, or

“(v) the acquisition of such property by the taxpayer in a transaction described in section 332, 351, 361, 721, or 731 (or the acquisition of such property by the taxpayer from the transferee or acquiring corporation in a transaction described in such section), to the extent that the basis of the property in the hands of the taxpayer is determined by reference to its basis in the hands of the transferor or distributor.

“(4) QUALIFIED RESTAURANT PROPERTY.—For purposes of this subsection, the term ‘qualified restaurant property’ means any section 1250 property which is—

“(A) a building, or

“(B) an improvement to a building,

if more than 50 percent of the building’s square footage is devoted to preparation of, and seating for on-premises consumption of, prepared meals.

“(5) QUALIFIED RETAIL IMPROVEMENT PROPERTY.—

“(A) IN GENERAL.—The term ‘qualified retail improvement property’ means any improvement to an interior portion of a building which is nonresidential real property if—

“(i) such portion is open to the general public and is used in the retail trade or business of selling tangible personal property to the general public, and

“(ii) such improvement is placed in service more than 3 years after the date the building was first placed in service.

“(B) IMPROVEMENTS MADE BY OWNER.—In the case of an improvement made by the owner of such improvement, such improvement shall be qualified retail improvement property (if at all) only so long as such improvement is held by such owner. Rules similar to the rules under paragraph (3)(E) shall apply for purposes of the preceding sentence.

“(C) CERTAIN IMPROVEMENTS NOT INCLUDED.—Such term shall not include any improvement for which the expenditure is attributable to—

“(i) the enlargement of the building,

“(ii) any elevator or escalator,

“(iii) any structural component benefitting a common area, or

“(iv) the internal structural framework of the building.”.

(E) Section 280F(b) is amended—

(i) by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively, and

(ii) by striking “, and the depreciation deduction” and all that follows through “alternative depreciation system)” in paragraph (1) (as redesignated by clause (i)).

(F) Section 280F(d)(4)(A)(iv) is amended by striking “section 168(i)(2)(B)” and inserting “section 168(e)(6)(B)”.

(G) Section 312(k)(3) is amended by striking “Exception for tangible property” and all that follows through “For purposes of computing the earnings and profits” and inserting “Exception for certain tangible property.—For purposes of computing the earnings and profits”.

(H) Section 460(c) is amended by striking paragraph (6).

(I) Section 460(d)(2) is amended by striking “section 168(h)(2)(D)” and inserting “section 168(g)(2)(D)”.

(J) Section 460(e)(6) is amended by striking “section 168(e)(2)(A)(ii)” each place it appears and inserting “section 168(e)(2)(B)”.

(K) (i) Subparagraphs (A) and (C) of section 470(c)(2) are each amended by striking “section 168(h)” and inserting “section 168(g).”

(ii) Section 470(c)(2)(B) is amended by striking “section 168(h)(6)” and inserting “section 168(g)(6)”.

(L) Section 512(b)(17)(B)(ii)(I) is amended by striking “section 168(h)(4)(B)” and inserting “section 168(g)(4)(B)”.

(M) Section 514(c)(9)(B)(vi)(II) is amended by striking “section 168(h)(6)” and inserting “section 168(g)(6)”.

(N) Section 527(i)(3)(D) is amended by striking “section 168(h)(4)” and inserting “section 168(g)(4)”.

(O) The second sentence of section 860E(e)(5) is amended by striking “section 168(h)(2)(D)” and inserting “section 168(g)(2)(D)”.

(P) Section 1245(a) is amended—

(i) in paragraph (3)(D), by striking “section 168(i)(13)” and inserting “paragraph (4)”, and

(ii) by adding at the end the following new paragraph:

“(4) SINGLE PURPOSE AGRICULTURAL OR HORTICULTURAL STRUCTURE.—For purposes of this subsection—

“(A) IN GENERAL.—The term ‘single purpose agricultural or horticultural structure’ means—

“(i) a single purpose livestock structure, and

“(ii) a single purpose horticultural structure.

“(B) DEFINITIONS.—For purposes of this paragraph—

“(i) SINGLE PURPOSE LIVESTOCK STRUCTURE.—The term ‘single purpose livestock structure’ means any enclosure or structure specifically designed, constructed, and used—

“(I) for housing, raising, and feeding a particular type of livestock and their produce, and

“(II) for housing the equipment (including any replacements) necessary for the housing, raising, and feeding referred to in subclause (I).

“(ii) SINGLE PURPOSE HORTICULTURAL STRUCTURE.—The term ‘single purpose horticultural structure’ means—

“(I) a greenhouse specifically designed, constructed, and used for the commercial production of plants, and

“(II) a structure specifically designed, constructed, and used for the commercial production of mushrooms.

“(iii) STRUCTURES WHICH INCLUDE WORK SPACE.—An enclosure or structure which provides work space shall be treated as a single purpose agricultural or horticultural structure only if such work space is solely for—

“(I) the stocking, caring for, or collecting of livestock or plants (as the case may be) or their produce,

“(II) the maintenance of the enclosure or structure, and

“(III) the maintenance or replacement of the equipment or stock enclosed or housed therein.

“(iv) LIVESTOCK.—The term “livestock” includes poultry.”.

(Q) Section 1245(a)(3)(F) is amended to read as follows:

“(F) any clearing and grading land improvements or tunnel bore (within the meaning of section 168(c)(2)(P)).”.

(R) Section 6050V(d)(3) is amended by striking “section 168(h)(2)(A)(iv)” and inserting “section 168(g)(2)(A)(iv)”.

(S) Section 6211(b)(4)(A) is amended by striking “168(k)(4),”.

(T) The second sentence of section 7701(e)(4)(A) is amended by striking “section 168(h)” and inserting “section 168(g)”.

(U) Section 7871(f)(3) is amended—

(i) by striking “(as defined in section 168(j)(6))” in subparagraph (B)(ii), and

(ii) by adding at the end the following new subparagraph:

“(D) INDIAN RESERVATION.—For purposes of this paragraph, the term ‘Indian reservation’ means a reservation, as defined in—

“(i) section 3(d) of the Indian Financing Act of 1974 (25 U.S.C. 1452(d)), or

“(ii) section 4(10) of the Indian Child Welfare Act of 1978 (25 U.S.C. 1903(10)).

For purposes of the preceding sentence, such section 3(d) shall be applied by treating the term ‘former Indian reservations in Oklahoma’ as including only lands which are within the jurisdictional area of an Oklahoma Indian tribe (as determined by the Secretary of the Interior) and are recognized by such Secretary as eligible for trust land status under 25 CFR Part 151 (as in effect on August 5, 1997).”.

(g) Normalization requirements.—

(1) IN GENERAL.—A normalization method of accounting shall not be treated as being used with respect to any public utility property for purposes of section 167 or 168 of the Internal Revenue Code of 1986 if the taxpayer, in computing its cost of service for ratemaking purposes and reflecting operating results in its regulated books of account, reduces the excess tax reserve more rapidly or to a greater extent than such reserve would be reduced under the average rate assumption method.

(2) ALTERNATIVE METHOD FOR CERTAIN TAXPAYERS.—If, as of the first day of the taxable year that includes the date of enactment of this Act—

(A) the taxpayer was required by a regulatory agency to compute depreciation for public utility property on the basis of an average life or composite rate method, and

(B) the taxpayer’s books and underlying records did not contain the vintage account data necessary to apply the average rate assumption method,

the taxpayer will be treated as using a normalization method of accounting if, with respect to such jurisdiction, the taxpayer uses the alternative method for public utility property that is subject to the regulatory authority of that jurisdiction.

(3) DEFINITIONS.—For purposes of this subsection—

(A) EXCESS TAX RESERVE.—The term “excess tax reserve” means the excess of—

(i) the reserve for deferred taxes (as described in section 168(i)(9)(A)(ii) of the Internal Revenue Code of 1986 as in effect on the day before the date of the enactment of this Act), over

(ii) the amount which would be the balance in such reserve if the amount of such reserve were determined by assuming that the corporate rate reductions provided in this Act were in effect for all prior periods.

(B) AVERAGE RATE ASSUMPTION METHOD.—The average rate assumption method is the method under which the excess in the reserve for deferred taxes is reduced over the remaining lives of the property as used in its regulated books of account which gave rise to the reserve for deferred taxes. Under such method, if timing differences for the property reverse, the amount of the adjustment to the reserve for the deferred taxes is calculated by multiplying—

(i) the ratio of the aggregate deferred taxes for the property to the aggregate timing differences for the property as of the beginning of the period in question, by

(ii) the amount of the timing differences which reverse during such period.

(C) ALTERNATIVE METHOD.—The “alternative method” is the method in which the taxpayer—

(i) computes the excess tax reserve on all public utility property included in the plant account on the basis of the weighted average life or composite rate used to compute depreciation for regulatory purposes, and

(ii) reduces the excess tax reserve ratably over the remaining regulatory life of the property.

(4) TAX INCREASED FOR NORMALIZATION VIOLATION.—If, for any taxable year ending after the date of the enactment of this Act, the taxpayer does not use a normalization method of accounting, 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.

(h) Effective date.—The amendments made by this section shall apply to property placed in service after December 31, 2016.

SEC. 3105. Repeal of amortization of pollution control facilities.

(a) In general.—Part VI of subchapter B of chapter 1 is amended by striking section 169 (and by striking the item relating to such section in the table of sections for such part).

(b) Conforming amendments.—

(1) Section 642(f) is amended by striking “the deductions for amortization provided by sections 169 and 197” and inserting “the deduction for amortization provided by section 197”.

(2) Section 1250(b)(3) is amended by inserting “(as in effect before its repeal by the Tax Reform Act of 2014)” after “169”.

(c) Effective date.—The amendments made by this section shall apply to facilities placed in service after December 31, 2014.

SEC. 3106. Net operating loss deduction.

(a) Limitation on net operating losses of corporations.—

(1) IN GENERAL.—Section 172(a) is amended to read as follows:

“(a) Deduction allowed.—

“(1) IN GENERAL.—There shall be allowed as a deduction for the taxable year an amount equal to the aggregate of—

“(A) the net operating loss carryovers to such year, plus

“(B) the net operating loss carrybacks to such year.

“(2) LIMITATION IN CASE OF CORPORATIONS.—In the case of a corporation—

“(A) the deduction allowed under paragraph (1) for the taxable year shall not exceed 90 percent of the taxable income for such year computed without regard to the deduction allowable under this section, and

“(B) appropriate adjustments in the application of subsection (b)(2) shall be made to take into account the limitation of subparagraph (A).

“(3) NET OPERATING LOSS DEDUCTION DEFINED.—For purposes of this subtitle, the term ‘net operating loss deduction’ means the deduction allowed by this subsection.”.

(2) COORDINATION WITH LIMITATION ON DEDUCTION FOR CHARITABLE CONTRIBUTIONS.—

(A) IN GENERAL.—Section 170(b)(2)(C) is amended by redesignating clauses (iv) and (v) as clauses (v) and (vi), respectively, and by inserting after clause (iii) the following new clause:

“(iv) the limitation imposed under section 172(a)(2)(A),”.

(B) LIFE INSURANCE COMPANIES.—Section 805(b)(2)(A) is amended by redesignating clauses (ii) through (v) as clauses (iii) through (vi), respectively, and by inserting after clause (i) the following new clause:

“(ii) the limitation imposed under section 172(a)(2)(A),”.

(b) Repeal of special carryback provisions.—

(1) IN GENERAL.—Section 172(b)(1) is amended by striking subparagraphs (C), (D), (E), (G), (H), (I), and (J) and by redesignating subparagraph (F) as subparagraph (C).

(2) CONFORMING AMENDMENTS.—

(A) Section 172(b)(1)(C), as redesignated by paragraph (1), is amended—

(i) in clause (ii), by striking the last sentence, and

(ii) in clause (iv), by striking “in a manner similar to the manner in which a specified liability loss is treated” and inserting “as a separate net operating loss for such taxable year to be taken into account after the remaining portion of the net operating loss for such taxable year”.

(B) Section 172 is amended by striking subsections (f), (g), (h), (i), and (j) and by redesignating subsection (k) as subsection (f).

(c) Effective dates.—

(1) LIMITATION ON NOLS OF CORPORATIONS.—The amendments made by subsection (a) shall apply to—

(A) taxable years beginning after December 31, 2014, and

(B) to carrybacks of losses arising in taxable years beginning after December 31, 2014, to taxable years beginning on or before such date.

(2) REPEAL OF SPECIAL CARRYBACKS.—

(A) IN GENERAL.—Except as otherwise provided in this paragraph, the amendments made by subsection (b) shall apply to losses arising in taxable years beginning after December 31, 2014.

(B) EXPIRED PROVISIONS.—So much of the amendments made by subsection (b) as relate to striking subparagraphs (D), (H), (I), and (J) of section 172(b)(1) of the Internal Revenue Code of 1986 shall take effect on the date of the enactment of this Act.

SEC. 3107. Circulation expenditures.

(a) In general.—Section 173 is amended to read as follows:

“SEC. 173. Circulation expenditures.

“(a) In general.—In the case of a taxpayer’s specified circulation expenditures—

“(1) except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and

“(2) the taxpayer shall—

“(A) charge such expenditures to capital account, and

“(B) be allowed an amortization deduction of such expenditures ratably over the 36-month period beginning with the midpoint of the month in which such expenditures are paid or incurred.

“(b) Specified circulation expenditures.—For purposes of this section, the term ‘specified circulation expenditures’ means all expenditures (other than expenditures for the purchase of land or depreciable property or for the acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical) to establish, maintain, or increase the circulation of a newspaper, magazine, or other periodical.

“(c) Treatment upon abandonment.—If any property with respect to which specified circulation 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.

“(d) Phase-In for taxable years beginning before 2019.—

“(1) IN GENERAL.—In the case of specified circulation expenditures paid or incurred in taxable years beginning before 2019—

“(A) notwithstanding subsection (a), the applicable percentage of such expenditures shall be allowed as a deduction for the taxable year in which paid or incurred, and

“(B) subsection (a) shall apply to the remainder of such expenditures.

“(2) APPLICABLE PERCENTAGE.—For purposes of paragraph (1), the applicable percentage shall be determined in accordance with the following table:


“In the case of taxable years beginning in: The applicable percentage is:
2016 75%
2017 50%
2018 25%

“(3) ELECTION OUT OF PHASE-IN.—The taxpayer may elect, at such time and in such form and manner as the Secretary shall prescribe, for paragraph (1) not to apply for all taxable years beginning before 2019. Such election, once made, shall be irrevocable.”.

(b) Effective date.—The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2015.

SEC. 3108. Amortization of research and experimental expenditures.

(a) In general.—Section 174 is amended to read as follows:

“SEC. 174. Amortization of research and experimental expenditures.

“(a) In general.—In the case of a taxpayer’s specified research or experimental expenditures for any taxable year—

“(1) except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and

“(2) the taxpayer shall—

“(A) charge such expenditures to capital account, and

“(B) be allowed an amortization deduction of such expenditures ratably over the 5-year period (15-year period in the case of any specified research or experimental expenditures which are attributable to foreign research (within the meaning of section 41(d)(4)(F))) beginning with the midpoint of the taxable year in which such expenditures are paid or incurred.

“(b) Specified research or experimental expenditures.—For purposes of this section, the term ‘specified research or experimental expenditures’ means, with respect to any taxable year, research or experimental expenditures which are paid or incurred by the taxpayer during such taxable year in connection with the taxpayer’s trade or business.

“(c) Special rules.—

“(1) LAND AND OTHER PROPERTY.—This section shall not apply to any expenditure for the acquisition or improvement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes of this section allowances under section 167, and allowances under section 611, shall be considered as expenditures.

“(2) EXPLORATION EXPENDITURES.—This section shall not apply to any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including oil and gas).

“(3) SOFTWARE DEVELOPMENT.—For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure.

“(d) Treatment upon disposition, retirement, or abandonment.—If any property with respect to which specified research or experimental expenditures are paid or incurred is disposed, retired, or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section, no deduction shall be allowed with respect to such expenditures on account of such disposition, retirement, or abandonment and such amortization deduction shall continue with respect to such expenditures.

“(e) Special rules for expenditures for domestic research during taxable years beginning before 2021.—

“(1) IN GENERAL.—In the case of domestic research or experimental expenditures paid or incurred during any taxable year beginning before 2021—

“(A) notwithstanding subsection (a), the applicable percentage of such expenditures shall be allowed as a deduction in the taxable year in which paid or incurred, and

“(B) subsection (a) shall apply to the remainder of such expenditures by substituting the applicable period for ‘the 5-year period’.

“(2) DOMESTIC RESEARCH OR EXPERIMENTAL EXPENDITURES.—For purposes of this subsection, the term ‘domestic research or experimental expenditures’ means any expenditures—

“(A) to which subsection (a) applies (determined without regard to this subsection), and

“(B) which are not attributable to foreign research (within the meaning of section 41(d)(4)(F)).

“(3) APPLICABLE PERCENTAGE.—For purposes of this subsection, the applicable percentage shall be determined in accordance with the following table:


“In the case of taxable years beginning in: The applicable percentage is:
2015 60%
2016 or 2017 40%
2018, 2019, or 2020 20%

“(4) APPLICABLE PERIOD.—For purposes of this subsection, the applicable period shall be determined in accordance with the following table:


“In the case of taxable years beginning in: The applicable period is the:
2015 2-year period
2016 or 2017 3-year period
2018, 2019, or 2020 4-year period

“(5) ELECTION OUT OF PHASE-IN.—The taxpayer may elect, at such time and in such form and manner as the Secretary shall prescribe, for paragraph (1) not to apply to all domestic research or experimental expenditures of the taxpayer for any taxable years beginning before 2021. Such election, once made, shall be irrevocable.”.

(b) Clerical amendment.—The table of sections for part VI of subchapter B of chapter 1 is amended by striking the item relating to section 174 and inserting the following new item:


“Sec. 174. Amortization of research and experimental expenditures.”.

(c) Effective date.—The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2014.

SEC. 3109. Repeal of deductions for soil and water conservation expenditures and endangered species recovery expenditures.

(a) In general.—Part VI of subchapter B of chapter 1 is amended by striking section 175 (and by striking the item relating to such section in the table of sections for such part).

(b) Conforming amendments.—Paragraphs (1)(A) and (2) of section 1252(a) are each amended by striking “relating to soil and water conservation expenditures” and inserting “as in effect before its repeal by the Tax Reform Act of 2014”.

(c) Effective date.—

(1) IN GENERAL.—The amendments made by this section shall apply to amounts paid or incurred after December 31, 2014.

(2) ASSESSMENTS TREATED AS PAID OR INCURRED.—In the case of any amount paid or incurred before December 31, 2014, and treated as paid or incurred in any succeeding taxable year by reason of section 175(f) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of this Act), paragraph (1) shall not apply.

SEC. 3110. Amortization of certain advertising expenses.

(a) In general.—Part VI of subchapter B of chapter 1 is amended by inserting after section 176 the following new section:

“SEC. 177. Amortization of certain advertising expenses.

“(a) In general.—In the case of a taxpayer’s amortizable advertising expenses for any taxable year—

“(1) except as provided in paragraph (2), no deduction shall be allowed for such expenses, and

“(2) the taxpayer shall—

“(A) charge such expenses to capital account, and

“(B) be allowed an amortization deduction of such expenses ratably over the 10-year period beginning with the midpoint of the taxable year in which such expenses are paid or incurred.

“(b) Exemption.—

“(1) IN GENERAL.—So much of the taxpayer’s otherwise deductible advertising expenses for any taxable year as do not exceed $1,000,000 shall not be taken into account in determining such taxpayer’s amortizable advertising expenses for such taxable year.

“(2) PHASEOUT OF EXEMPTION.—In the case of a taxpayer whose otherwise deductible advertising expenses for any taxable year exceed $1,500,000, the dollar amount in effect under paragraph (1) with respect to such taxpayer for such taxable year shall be reduced (but not below zero) by twice such excess.

“(3) AGGREGATION; SHORT TAXABLE YEARS.—For purposes of this subsection, rules similar to the rules of paragraphs (2) and (3)(B) of section 448(b) shall apply.

“(c) Amortizable advertising expenses.—

“(1) IN GENERAL.—For purposes of this section, the term ‘amortizable advertising expenses’ means, with respect to any taxpayer for any taxable year, the applicable percentage of the taxpayer’s otherwise deductible advertising expenses for such taxable year.

“(2) APPLICABLE PERCENTAGE.—For purposes of this subsection, the term ‘applicable percentage’ means (with respect to the taxpayer’s otherwise deductible advertising expenses for any taxable year) the percentage determined in accordance with the following table:


“For taxable years beginning in: The applicable percentage is:
2015 20 percent
2016 30 percent
2017 40 percent
2018 or thereafter 50 percent.

“(3) ELECTION OUT OF PHASE-IN.—The taxpayer may elect, at such time and in such form and manner as the Secretary shall prescribe, to treat the applicable percentage as being equal to 50 percent for all taxable years beginning before 2018. Such election, once made, shall be irrevocable.

“(d) Otherwise deductible advertising expenses.—For purposes of this section—

“(1) IN GENERAL.—The term ‘otherwise deductible advertising expenses’ means, with respect to any taxpayer for any taxable year, the deductions which would (but for this section) be allowable to the taxpayer for such taxable year with respect to specified advertising expenses.

“(2) SPECIFIED ADVERTISING EXPENSES.—The term ‘specified advertising expenses’ means any amount paid or incurred for the development, production, or placement (including any form of transmission, broadcast, publication, display, or distribution) of any communication to the general public (or portions thereof) which is intended to promote the taxpayer or a trade or business of the taxpayer (or any service, facility, or product provided pursuant to such trade or business).

“(3) EXCEPTIONS.—The term ‘specified advertising expenses’ shall not include—

“(A) CERTAIN WAGES.—Wages paid or incurred to any employee unless the services rendered by such employee are primarily related to—

“(i) an activity described in paragraph (2) (other than the direct sale of goods or services to customers of the taxpayer), or

“(ii) the direct supervision of employees rendering services primarily related to such an activity.

“(B) DEPRECIATION OF TANGIBLE PROPERTY.—In the case of any tangible property, any amount for which a deduction is allowed for depreciation under section 167.

“(C) AMORTIZABLE SECTION 197 INTANGIBLES.—Any amount for which a deduction is allowed for amortization under section 197.

“(D) DISCOUNTS, ETC.—Any discount, coupon, rebate, slotting allowance, sample, prize, loyalty reward point, or any item determined by the Secretary to be similar to any of the foregoing (other than any amount paid or incurred to promote any of the foregoing).

“(E) CERTAIN COMMUNICATIONS ON TAXPAYER’S PROPERTY.—Any amount paid or incurred with respect to any communication appearing on tangible property of the taxpayer which—

“(i) is of a character subject to the allowance for depreciation, or

“(ii) is properly treated as inventory for purposes of section 471.

“(F) CREATION OF LOGOS, TRADE NAMES, ETC.—Any amount paid or incurred for the creation of any logo, trademark, or trade name.

“(G) PACKAGE DESIGN.—Any amount to which section 263A(i) applies.

“(H) MARKETING RESEARCH.—Any amount paid or incurred for marketing research.

“(I) BUSINESS MEALS.—Any amount paid or incurred for meals.

“(J) QUALIFIED SPONSORSHIP PAYMENTS.—Any amount paid or incurred as a qualified sponsorship payment (as defined in section 513(i)(2)) with respect to an organization subject to the tax imposed by section 511.

“(e) Treatment upon abandonment.—If any property with respect to which specified advertising expenses are paid or incurred is disposed, retired, or abandoned during the period during which such expenses are allowed as an amortization deduction under this section, no deduction shall be allowed with respect such expenses on account of such disposition, retirement, or abandonment and such amortization deduction shall continue with respect to such expenses.

“(f) Inflation adjustment.—

“(1) IN GENERAL.—In the case of any taxable year beginning after 2015, each of the dollar amounts in subsection (b) shall be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 2014’ for ‘calendar year 2012’ in clause (ii) thereof.

“(2) ROUNDING.—The amount of any increase under paragraph (1) shall be rounded to the nearest multiple of $10,000.”.

(b) Capitalization of package design expenses.—Section 263A is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:

“(i) Capitalization of package design expenses.—For purposes of this section, in the case of any amount paid or incurred for package design, such amounts shall be treated as an indirect cost described in subsection (a)(2)(B) with respect to packages which utilize such design.”.

(c) Clerical amendment.—The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the item relating to section 176 the following new item:


“Sec. 177. Amortization of certain advertising expenses.”.

(d) Effective date.—The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2014.

SEC. 3111. Expensing certain depreciable business assets for small business.

(a) In general.—

(1) DOLLAR LIMITATION.—Paragraph (1) of section 179(b) is amended by striking “shall not exceed—” and all that follows and inserting “shall not exceed $250,000.”.

(2) REDUCTION IN LIMITATION.—Paragraph (2) of section 179(b) is amended by striking “exceeds—” and all that follows and inserting “exceeds $800,000.”.

(b) Computer software.—Clause (ii) of section 179(d)(1)(A) is amended by striking “to which section 167 applies, and which is placed in service in a taxable year beginning after 2002 and before 2014” and inserting “and to which section 167 applies”.

(c) Election.—Paragraph (2) of section 179(c) is amended—

(1) by striking “may not be revoked” and all that follows through “and before 2014”, and

(2) by striking “irrevocable” in the heading thereof.

(d) Air conditioning and heating units.—Paragraph (1) of section 179(d) is amended by striking “and shall not include air conditioning or heating units”.

(e) Qualified real property.—Section 179(f) is amended—

(1) by striking “beginning in 2010, 2011, 2012, or 2013” in paragraph (1), and

(2) by striking paragraphs (3) and (4).

(f) Inflation adjustment.—Subsection (b) of section 179 is amended by adding at the end the following new paragraph:

“(6) INFLATION ADJUSTMENT.—

“(A) IN GENERAL.—In the case of any taxable year beginning after 2014, the dollar amounts in paragraphs (1) and (2) shall each be increased by an amount equal to—

“(i) such dollar amount, multiplied by

“(ii) the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 2013’ for ‘calendar year 2012’ in clause (ii) thereof.

“(B) ROUNDING.—The amount of any increase under subparagraph (A) shall be rounded to the nearest multiple of $10,000.”.

(g) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2013.

SEC. 3112. Repeal of election to expense certain refineries.

(a) In general.—Part VI of subchapter B of chapter 1 is amended by striking section 179C (and by striking the item relating to such section in the table of sections for such part).

(b) Conforming amendment.—Section 312(k)(3), as amended by the preceding provisions of this Act, is amended by striking “, 179C” each place it appears.

(c) Effective date.—The amendments made by this section shall apply to property placed in service after December 31, 2013.

SEC. 3113. Repeal of deduction for energy efficient commercial buildings.

(a) In general.—Part VI of subchapter B of chapter 1 is amended by striking section 179D (and by striking the item relating to such section in the table of sections for such part).

(b) Conforming amendment.—

(1) Section 1016(a) is amended by striking paragraph (31).

(2) Section 312(k)(3), as amended by the preceding provisions of this Act, is amended by striking “, 179D” each place it appears.

(c) Effective date.—The amendments made by this section shall apply to property placed in service after December 31, 2013.

SEC. 3114. Repeal of election to expense advanced mine safety equipment.

(a) In general.—Part VI of subchapter B of chapter 1 is amended by striking section 179E (and by striking the item relating to such section in the table of sections for such part).

(b) Conforming amendment.—Section 312(k)(3), as amended by the preceding provisions of this Act, is amended—

(1) by striking “, or 179E, as the case may be”, and

(2) by striking “, or 179E” each place it appears.

(c) Effective date.—The amendments made by this section shall apply to property placed in service after December 31, 2013.

SEC. 3115. Repeal of deduction for expenditures by farmers for fertilizer, etc.

(a) In general.—Part VI of subchapter B of chapter 1 is amended by striking section 180 (and by striking the item relating to such section in the table of sections for such part).

(b) Effective date.—The amendments made by this section shall apply to expenses paid or incurred in taxable years beginning after December 31, 2014.

SEC. 3116. Repeal of special treatment of certain qualified film and television productions.

(a) In general.—Part VI of subchapter B of chapter 1 is amended by striking section 181 (and by striking the item relating to such section in the table of sections for such part).

(b) Effective date.—The amendments made by this section shall apply to productions commencing after December 31, 2013.

SEC. 3117. Repeal of special rules for recoveries of damages of antitrust violations, etc.

(a) In general.—Part VI of subchapter B of chapter 1 is amended by striking section 186 (and by striking the item relating to such section in the table of sections for such part).

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 3118. Treatment of reforestation expenditures.

(a) Elimination of expensing election.—Section 194 is amended by striking subsections (a) and (b), by redesignating subsection (c) and (d) as subsections (b) and (c), respectively, and by inserting before subsection (b) (as so redesignated) the following new subsection:

“(a) In general.—In the case of a taxpayer’s qualified reforestation expenditures for any taxable year—

“(1) except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and

“(2) the taxpayer shall—

“(A) charge such expenditures to capital account, and

“(B) be allowed an amortization deduction of such expenditures ratably over the 7-year period beginning with the midpoint of the taxable year in which such expenditures are paid or incurred.”.

(b) Qualified reforestation expenditures.—Section 194(b), as redesignated by subsection (a), is amended by striking paragraph (2), by redesignating paragraph (1) as paragraph (2), and by inserting before paragraph (2) (as so redesignated the following new paragraph:

“(1) QUALIFIED REFORESTATION EXPENDITURES.—The term ‘qualified reforestation expenditures’ means, with respect to any taxable year, the reforestation expenditures paid or incurred by the taxpayer during such taxable year with respect to qualified timber property.”.

(c) Qualified timber property limited to ornamental trees.—Section 194(b)(2), as redesignated by subsections (a) and (b), is amended to read as follows:

“(2) QUALIFIED TIMBER PROPERTY.—The term ‘qualified timber property’ means a woodlot or other site located in the United States which—

“(A) will contain evergreen trees in significant commercial quantities which are reasonably expected to be more than 6 years old at the time severed from the roots, and

“(B) is held by the taxpayer for the planting, cultivating, caring for, and cutting of such trees for sale for ornamental purposes.”.

(d) Determination of recomputed basis.—Section 1245(b) is amended by striking paragraph (7).

(e) Effective date.—The amendments made by this section shall apply to expenditures paid or incurred in taxable years beginning after December 31, 2014.

SEC. 3119. 20-year amortization of goodwill and certain other intangibles.

(a) In general.—Subsection (a) of section 197 is amended by striking “15-year period” and inserting “20-year period”.

(b) Mortgage servicing rights.—Subsection (e) of section 197 is amended by striking paragraph (6) and by redesignating paragraph (7) as paragraph (6).

(c) Conforming amendments.—

(1) Clause (i) of section 197(e)(4)(D) is amended by striking “15 years” and inserting “20 years”.

(2) Section 167(f) is amended by striking paragraph (3).

(d) Effective date.—The amendments made by this section shall apply to property acquired after December 31, 2014.

SEC. 3120. Treatment of environmental remediation costs.

(a) In general.—Subsection (a) of section 198 is amended to read as follows:

“(a) In general.—In the case of a taxpayer’s qualified environmental remediation expenditures for any taxable year—

“(1) except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and

“(2) the taxpayer shall—

“(A) charge such expenditures to capital account, and

“(B) be allowed an amortization deduction of such expenditures ratably over the 40-year period beginning with the midpoint of the taxable year in which such expenditures are paid or incurred.”.

(b) Made permanent.—Section 198 is amended by striking subsection (h).

(c) Conforming amendments.—

(1) Section 198, as amended by subsection (b), is amended by striking subsection (f) and by redesignating subsection (g) as subsection (f).

(2) Section 198 (and the item relating to such section in the table of sections for part VI of subchapter B of chapter 1) is amended by striking “Expensing” in the heading thereof and inserting “Amortization”.

(d) Effective date.—The amendments made by this section shall apply to expenditures paid or incurred after December 31, 2014.

SEC. 3121. Repeal of expensing of qualified disaster expenses.

(a) In general.—Part VI of subchapter B of chapter 1 is amended by striking section 198A (and by striking the item relating to such section in the table of sections for such part).

(b) Effective date.—The amendments made by this section shall apply to amounts paid or incurred after December 31, 2014.

SEC. 3122. Phaseout and repeal of deduction for income attributable to domestic production activities.

(a) Phaseout.—

(1) IN GENERAL.—Subsection (a) of section 199 is amended by adding at the end the following new paragraph:

“(3) PHASEOUT.—In the case of any taxable year beginning after 2014, paragraph (1) shall be applied by substituting for the percentage contained therein the phaseout percentage determined under the following table:


“For taxable years beginning in: The phaseout percentage is:
2015 6%
2016 3%”.

(2) COORDINATION WITH OIL RELATED QUALIFIED PRODUCTION ACTIVITIES INCOME.—Section 199(d) is amended by striking paragraph (9).

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years beginning after December 31, 2014.

(b) Repeal.—

(1) IN GENERAL.—Part VI of subchapter B of chapter 1 is amended by striking section 199 (and by striking the item relating to such section in the table of sections for such part).

(2) CONFORMING AMENDMENTS.—

(A) Sections 86(b)(2)(A), 137(b)(3)(A), 246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking “199,”.

(B) Section 163(j)(6)(A)(i), as amended by the preceding provisions of this Act, is amended by striking subclause (III) and by redesignating subclauses (IV) and (V) as subclauses (III) and (IV), respectively.

(C) Section 170(b)(2)(C), as amended by the preceding provisions of this Act, is amended by striking clause (v), by redesignating clause (vi) as clause (v), and by inserting “and” at the end of clause (iv).

(D) Section 172(d) is amended by striking paragraph (7).

(E) Section 1402(a) is amended by adding “and” at the end of paragraph (15) and by striking paragraph (16).

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years beginning after December 31, 2016.

SEC. 3123. Unification of deduction for organizational expenditures.

(a) In general.—Subsections (a) and (b) of section 195 is amended by inserting “and organizational” after “start-up” each place it appears.

(b) Organizational expenditures.—Subsection (c) of section 195 is amended by adding at the end the following new paragraph:

“(3) ORGANIZATIONAL EXPENDITURES.—The term ‘organizational expenditures’ means any expenditure which—

“(A) is incident to the creation of a corporation or a partnership,

“(B) is chargeable to capital account, and

“(C) is of a character which, if expended incident to the creation of a corporation or a partnership having a limited life, would be amortizable over such life.”.

(c) Dollar amounts.—Clause (ii) of section 195(b)(1)(A) is amended—

(1) by striking “$5,000” and inserting “$10,000”, and

(2) by striking “$50,000” and inserting “$60,000”.

(d) Mid-Year convention.—Subparagraph (B) of section 195(b)(1), as amended by subsection (a), is amended to read as follows:

“(B) the remainder of such start-up and organizational expenditures shall be charged to capital account and allowed as an amortization deduction determined by amortizing such expenditures ratably over the 15-year period beginning with the midpoint of the taxable year in which the active trade or business begins.”.

(e) Conforming amendments.—

(1) Section 195(b)(1) is amended—

(A) by inserting “(or, in the case of a partnership, the partnership elects)” after “If a taxpayer elects”, and

(B) by inserting “(or the partnership, as the case may be)” after “the taxpayer” in subparagraph (A).

(2) Section 195(b)(2) is amended—

(A) by striking “amortization period.—In any case” and inserting the following: “amortization period.—

“(A) IN GENERAL.—In any case”, and

(B) by adding at the end the following new subparagraph:

“(B) SPECIAL PARTNERSHIP RULE.—In the case of a partnership, subparagraph (A) shall be applied at the partnership level.”.

(3) Section 195(b) is amended by striking paragraph (3).

(4) (A) Part VIII of subchapter B of chapter 1 is amended by striking section 248 (and by striking the item relating to such section in the table of sections for such part).

(B) Section 170(b)(2)(C)(ii) is amended by striking “(except section 248)”.

(C) Section 312(n)(3) is amended by striking “Sections 173 and 248” and inserting “Section 173”.

(D) Section 535(b)(3) is amended by striking “(except section 248)”.

(E) Section 545(b)(3) is amended by striking “(except section 248)”.

(F) Section 834(c)(7) is amended by striking “(except section 248)”.

(G) Section 852(b)(2)(C) is amended by striking “(except section 248)”.

(H) Section 857(b)(2)(A) is amended by striking “(except section 248)”.

(I) Section 1363(b) is amended by inserting “and” at the end of paragraph (2), by striking paragraph (3), and by redesignating paragraph (4) as paragraph (3).

(J) Section 1375(b)(1)(B)(i) is amended by striking “(other than the deduction allowed by section 248, relating to organization expenditures)”.

(5) Part I of subchapter K of chapter 1 is amended by striking section 709 (and by striking the item relating to such section in the table of sections for such part).

(6) The heading of section 195 (and the item relating to such section in the table of sections for part VI of subchapter B of chapter 1) are each amended by inserting “and organizational” after “Start-up”.

(f) Effective date.—The amendments made by this section shall apply to expenses paid or incurred in taxable years beginning after December 31, 2014.

SEC. 3124. Prevention of arbitrage of deductible interest expense and tax-exempt interest income.

(a) Pro rata allocation rules applicable to financial institutions modified and made applicable to all C corporations.—

(1) APPLICATION TO CORPORATIONS.—So much of section 265(b) as precedes paragraph (3) is amended to read as follows:

“(b) Pro rata allocation of interest expense of corporations and financial institutions to tax-Exempt interest.—

“(1) IN GENERAL.—In the case of a C corporation or a financial institution, no deduction shall be allowed for that portion of the taxpayer’s interest expense which is allocable to tax-exempt interest.

“(2) ALLOCATION.—For purposes of paragraph (1), the portion of the taxpayer’s interest expense which is allocable to tax-exempt interest is an amount which bears the same ratio to such interest expense as—

“(A) the taxpayer’s average adjusted bases (within the meaning of section 1016) of tax-exempt obligations acquired on or after February 26, 2014 (August 7, 1986, in the case of a financial institution), bears to

“(B) such average adjusted bases for all assets of the taxpayer.”.

(2) REPEAL OF EXCEPTIONS.—Section 265(b) is amended by striking paragraphs (3) and (7).

(b) Limitation on investment interest.—

(1) IN GENERAL.—Section 163(d)(1) is amended to read as follows:

“(1) IN GENERAL.—In the case of a taxpayer other than a corporation, the amount allowed as a deduction under this chapter for investment interest for any taxable year—

“(A) shall be reduced by the amount of tax-exempt interest received by the taxpayer during such taxable year, and

“(B) shall not (after any reduction under subparagraph (A)) exceed the net investment income of the taxpayer for such taxable year.”.

(2) REDUCTIONS FOR TAX-EXEMPT INTEREST NOT CARRIED FORWARD.—Section 163(d)(2) is amended by striking “paragraph (1)” and inserting “paragraph (1)(B)”.

(3) CLARIFICATION THAT PROPERTY HELD FOR INVESTMENT INCLUDES PROPERTY PRODUCING TAX-EXEMPT INTEREST.—Section 163(d)(5)(A) is amended by striking “and” at the end of clause (i), by striking the period at the end of clause (ii)(II) and inserting “, and”, and by adding at the end the following new clause:

“(iii) any property held for the production of tax-exempt interest (including any shares of stock of a regulated investment company which during the taxable year of the holder thereof distributes exempt-interest dividends).”.

(4) COORDINATION WITH SECTION 265.—

(A) IN GENERAL.—Section 265(a) is amended by—

(i) striking paragraph (2) and inserting the following new paragraph:

“(2) INTEREST.—

“(A) CORPORATIONS AND FINANCIAL INSTITUTIONS.—For pro rata allocation rules in the case of corporations and financial institutions, see subsection (b).

“(B) OTHER TAXPAYERS.—For limitation on investment interest in the case of other taxpayers, see section 163(d).”, and

(ii) by striking paragraphs (4) and (5) and by redesignating paragraph (6) as paragraph (4).

(B) CONFORMING AMENDMENTS.—

(i) Section 265(b), as amended by subsection (a), is amended by inserting after paragraph (2) the following new paragraph:

“(3) SPECIAL RULES FOR SHORT SALES.—

“(A) IN GENERAL.—For purposes of this subsection, interest includes any amount paid or incurred—

“(i) by any person making a short sale in connection with personal property used in such short sale, or

“(ii) by any other person for the use of any collateral with respect to such short sale.

“(B) EXCEPTION WHERE NO RETURN ON CASH COLLATERAL .—If—

“(i) the taxpayer provides cash as collateral for any short sale, and

“(ii) the taxpayer receives no material earnings on such cash during the period of the sale,

subparagraph (A)(i) shall not apply to such short sale.”.

(ii) Section 265(b)(6) is amended to read as follows:

“(6) COORDINATION WITH SECTION 263A.—This section shall be applied before the application of section 263A (relating to capitalization of certain expenses where taxpayer produces property).”.

(iii) Section 163(n)(2) is amended to read as follows:

“(2) For disallowance of deduction for interest relating to tax-exempt income, see sections 163(d) and 265(b)”.

(c) Effective dates.—

(1) APPLICATION OF PRO RATA ALLOCATION RULES.—

(A) APPLICATION TO C CORPORATIONS.—The amendments made by subsection (a)(1) shall apply to taxable years ending on or after February 26, 2014.

(B) REPEAL OF EXCEPTIONS.—The amendments made by subsection (a)(2) shall apply to obligations issued on or after February 26, 2014.

(2) LIMITATION ON INVESTMENT INTEREST.—The amendments made by subsection (b) shall apply to taxable years beginning after December 31, 2014.

SEC. 3125. Prevention of transfer of certain losses from tax indifferent parties.

(a) In general.—Section 267(d) is amended to read as follows:

“(d) Amount of gain where loss previously disallowed.—

“(1) IN GENERAL.—If—

“(A) in the case of a sale or exchange of property to the taxpayer a loss sustained by the transferor is not allowable to the transferor as a deduction by reason of subsection (a)(1), and

“(B) the taxpayer sells or otherwise disposes of such property (or of other property the basis of which in the taxpayer’s hands is determined directly or indirectly by reference to such property) at a gain,

then such gain shall be recognized only to the extent that it exceeds so much of such loss as is properly allocable to the property sold or otherwise disposed of by the taxpayer.

“(2) EXCEPTION FOR WASH SALES.—Paragraph (1) shall not apply if the loss sustained by the transferor is not allowable to the transferor as a deduction by reason of section 1091 (relating to wash sales).

“(3) EXCEPTION FOR TRANSFERS FROM TAX INDIFFERENT PARTIES.—Paragraph (1) shall not apply to the extent any loss sustained by the transferor (if allowed) would not be taken into account in determining a tax imposed under section 1 or 11 or a tax computed as provided by either of such sections.”.

(b) Effective date.—The amendment made by this section shall apply to sales and exchanges after December 31, 2014.

SEC. 3126. Entertainment, etc. expenses.

(a) Denial of deduction.—Subsection (a) of section 274 is amended to read as follows:

“(a) Entertainment, amusement, or recreation.—

“(1) IN GENERAL.—No deduction otherwise allowable under this chapter shall be allowed for amounts paid or incurred for any of the following items:

“(A) ACTIVITY.—With respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation.

“(B) MEMBERSHIP DUES.—With respect to membership in any club organized for business, pleasure, recreation or other social purposes.

“(C) AMENITY.—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.

“(D) FACILITY.—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).

“(E) QUALIFIED TRANSPORTATION FRINGE AND PARKING FACILITY.—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)).

“(2) SPECIAL RULES.—For purposes of applying paragraph (1), an activity described in section 212 shall be treated as a trade or business.

“(3) REGULATIONS.—Under the regulations prescribed to carry out this section, the Secretary shall include regulations—

“(A) defining entertainment, amenities, recreation, amusement, and facilities for purposes of this subsection,

“(B) providing for the appropriate allocation of depreciation and other costs with respect to facilities used for parking, and

“(C) specifying arrangements a primary purpose of which is the avoidance of this subsection.”.

(b) Exception for certain expenses includible in income of recipient.—

(1) EXPENSES TREATED AS COMPENSATION.—Paragraph (2) of section 274(e) is amended to read as follows:

“(2) EXPENSES TREATED AS COMPENSATION.—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).”.

(2) EXPENSES INCLUDIBLE IN INCOME OF PERSONS WHO ARE NOT EMPLOYEES.—Paragraph (9) of section 274(e) is amended by striking “to the extent that the expenses” and inserting “to the extent that the expenses do not exceed the amount of the expenses that”.

(c) Exceptions for reimbursed expenses.—Paragraph (3) of section 274(e) is amended to read as follows:

“(3) REIMBURSED EXPENSES.—

“(A) IN GENERAL.—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—

“(i) 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

“(ii) 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.

“(B) EXCEPTION.—Except as provided by the Secretary, subparagraph (A) shall not apply—

“(i) in the case of an arrangement in which the person other than the employer is an entity described in section 168(g)(2)(A), or

“(ii) to any other arrangement designated by the Secretary as having the effect of avoiding the limitation under subparagraph (A).”.

(d) 50-Percent limitation on meals and entertainment expenses.—Subsection (n) of section 274 is amended to read as follows:

“(n) Limitation on certain expenses.—

“(1) IN GENERAL.—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.

“(2) EXCEPTIONS.—Paragraph (1) shall not apply to any expense if—

“(A) such expense is described in paragraph (2), (3), (6), (7), or (8) of subsection (e),

“(B) 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

“(C) 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.

“(3) SPECIAL RULE FOR INDIVIDUALS SUBJECT TO FEDERAL HOURS OF SERVICE.—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 ‘80 percent’ for ‘50 percent’.”.

(e) Conforming amendments.—

(1) Section 274(d) is amended—

(A) by striking paragraph (2) and redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively, and

(B) in the flush material following paragraph (3) (as so redesignated)—

(i) by striking “, entertainment, amusement, recreation, or” in item (B), and

(ii) by striking “(D) the business relationship to the taxpayer of persons entertained, using the facility or property, or receiving the gift” and inserting “(D) the business relationship to the taxpayer of the person receiving the benefit”.

(2) Section 274(e) is amended by striking paragraph (4) and redesignating paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), (5), (6), (7), and (8), respectively.

(3) Section 274(k)(2)(A) is amended by striking “(4), (7), (8), or (9)” and inserting “(6), (7), or (8)”.

(4) Section 274 is amended by striking subsection (l).

(5) Section 274(m)(1)(B)(ii) is amended by striking “(4), (7), (8), or (9)” and inserting “(6), (7), or (8)”.

(f) Effective date.—The amendments made by this section shall apply to amounts paid or incurred after December 31, 2014.

SEC. 3127. Repeal of limitation on corporate acquisition indebtedness.

(a) In general.—Part IX of subchapter B of chapter 1 is amended by striking section 279 (and by striking the item relating to such section in the table of sections for such part).

(b) Effective date.—The amendments made by this section shall apply to interest paid or incurred with respect to indebtedness incurred after December 31, 2014.

SEC. 3128. Denial of deductions and credits for expenditures in illegal businesses.

(a) In general.—Section 280E is amended to read as follows:

“SEC. 280E. Expenditures in connection with illegal businesses.

“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if—

“(1) such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted, or

“(2) the carrying out of such trade or business is a felony under Federal law or the law of any State in which such trade or business is conducted.”.

(b) Clerical amendment.—The table of sections for part IX of subchapter B of chapter 1 is amended by striking the item relating to section 280E and inserting the following new item:


“Sec. 280E. Expenditures in connection with illegal businesses.”.

(c) Effective date.—The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act in taxable years ending after the date of the enactment of this Act.

SEC. 3129. Limitation on deduction for FDIC premiums.

(a) In general.—Section 162 is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection:

“(q) Disallowance of FDIC premiums paid by certain large financial institutions.—

“(1) IN GENERAL.—No deduction shall be allowed for the applicable percentage of any FDIC premium paid or incurred by the taxpayer.

“(2) EXCEPTION FOR SMALL INSTITUTIONS.—Paragraph (1) shall not apply to any taxpayer for any taxable year if the total consolidated assets of such taxpayer (determined as of the close of such taxable year) do not exceed $10,000,000,000.

“(3) APPLICABLE PERCENTAGE.—For purposes of this subsection, the term ‘applicable percentage’ means, with respect to any taxpayer for any taxable year, the ratio (expressed as a percentage but not greater than 100 percent) which—

“(A) the excess of—

“(i) the total consolidated assets of such taxpayer (determined as of the close of such taxable year), over

“(ii) $10,000,000,000, bears to

“(B) $40,000,000,000.

“(4) FDIC PREMIUMS.—For purposes of this subsection, the term ‘FDIC premium’ means any assessment imposed under section 7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)).

“(5) TOTAL CONSOLIDATED ASSETS.—For purposes of this subsection, the term ‘total consolidated assets’ has the meaning given such term under section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5365).

“(6) AGGREGATION RULE.—

“(A) IN GENERAL.—Members of an expanded affiliated group shall be treated as a single taxpayer for purposes of applying this subsection.

“(B) EXPANDED AFFILIATED GROUP.—For purposes of this paragraph, the term ‘expanded affiliated group’ means an affiliated group as defined in section 1504(a), determined—

“(i) by substituting ‘more than 50 percent’ for ‘at least 80 percent’ each place it appears, and

“(ii) without regard to paragraphs (2) and (3) of section 1504(b).

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).”.

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 3130. Repeal of percentage depletion.

(a) In general.—Part I of subchapter I of chapter 1 is amended by striking sections 613 and 613A (and by striking the items relating to such sections in the table of sections for such part).

(b) Conforming amendments.—

(1) (A) Such part is amended by redesignating section 614 as section 613 (and, in the table of sections for such part, by redesignating the item relating to section 614 as an item relating to section 613).

(B) Clauses (iv) and (v) of section 465(c)(2)(A) are each amended by striking “section 614” and inserting “section 613”.

(C) Section 1016(e) is amended by striking “section 614” and inserting “section 613”.

(D) Section 1254(a)(3) is amended by striking “section 614” and inserting “section 613”.

(2) Section 45(c)(4) is amended to read as follows:

“(4) GEOTHERMAL ENERGY.—

“(A) IN GENERAL.—The term ‘geothermal energy’ means energy derived from a geothermal deposit.

“(B) GEOTHERMAL DEPOSIT.—The term ‘geothermal deposit’ means a geothermal reservoir consisting of natural heat which is stored in rocks or in an aqueous liquid or vapor (whether or not under pressure).”.

(3) Section 48(a)(3)(A)(iii) is amended by striking “section 613(e)(2)” and inserting “section 45(c)(4)(B)”

(4) Section 381(c) is amended by striking paragraph (18).

(5) Section 465(c)(1)(E) is amended by striking “section 613(e)(2)” and inserting “section 45(c)(4)(B)”.

(6) Section 468(d)(3) is amended by striking “section 614” and inserting “section 613”.

(7) Section 611(a) is amended by striking the second sentence.

(8) Section 613(d), as redesignated by paragraph (1), is amended by striking “includes only” and all that follows and inserting “includes only an interest burdened by the costs of production.”.

(9) Section 636(a) is amended by striking “(for purposes of section 613)”.

(10) Section 636(d) is amended by striking “section 614(a)” and inserting “section 613(a)”.

(11) Section 705(a) is amended—

(A) in paragraph (1), by adding “and” at the end of subparagraph (A), by striking “; and” at the end of subparagraph (B) and inserting a period, and by striking subparagraph (C),

(B) in paragraph (2), by striking “; and” at the end of subparagraph (B) and inserting a period, and

(C) by striking paragraph (3).

(12) Section 901(e)(1)(A) is amended by striking “(or, if smaller” and all that follows through “under section 613)”.

(13) Section 993(c)(2)(C) is amended by inserting “(as each such section was in effect before its repeal by the Tax Reform Act of 2014)” after “section 613 or 613A”.

(14) Section 1202(e)(3)(D) is amended by inserting “(as each such section was in effect before its repeal by the Tax Reform Act of 2014)” after “section 613 or 613A”.

(15) Section 1367(a) is amended—

(A) in paragraph (1), by adding “and” at the end of subparagraph (A), by striking “, and” at the end of subparagraph (B) and inserting a period, and by striking subparagraph (C), and

(B) in paragraph (2), by adding “and” at the end of subparagraph (C), by striking “, and” at the end of subparagraph (D) and inserting a period, and by striking subparagraph (E).

(16) Section 1446(c) is amended by striking paragraph (2) and by redesignating paragraph (3) as paragraph (2).

(17) Section 4612(a)(7) is amended by inserting “(as in effect before its repeal by the Tax Reform Act of 2014)” after “section 613”.

(18) Section 4940(c)(3)(B) is amended—

(A) by striking clause (ii), and

(B) by striking all that precedes “The deduction provided” and inserting the following:

“(B) MODIFICATIONS.—For purposes of subparagraph (A), the deduction provided”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 3131. Repeal of passive activity exception for working interests in oil and gas property.

(a) In general.—Subsection (c) of section 469 is amended by striking paragraph (3).

(b) Conforming amendments.—Section 469 is amended—

(1) by striking paragraph (4) and by redesignating paragraphs (5), (6), and (7) as paragraphs (3), (4), and (5), respectively, and

(2) in paragraph (2)—

(A) by striking “paragraph (7)” and inserting “paragraph (5)”, and

(B) by inserting “, without regard to whether or not the taxpayer materially participates in the activity” before the period at the end.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

SEC. 3132. Repeal of special rules for gain or loss on timber, coal, or domestic iron ore.

(a) In general.—Subchapter I of chapter 1 is amended by striking part III (and by striking the item relating to such part in the table of parts for such subchapter).

(b) Conforming amendments.—

(1) Section 512(b)(5) is amended by striking the last sentence.

(2) Section 871(a)(1)(B) is amended by striking “gains described in section 631(b) or (c), and”.

(3) Section 871(d)(1)(A) is amended—

(A) by striking “, (ii) rents” and inserting “and (ii) rents”, and

(B) by striking “, and (iii) gains described in section 631(b) or (c)”.

(4) (A) Section 881(a) is amended by striking paragraph (2) and by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

(B) Section 1442(a) is amended—

(i) by striking “881(a)(3) and (4)” and inserting “881(a)(2) and (3)”,

(ii) by striking “881(a)(3),” and inserting “881(a)(2),”, and

(iii) by striking “881(a)(4)” and inserting “881(a)(3)”.

(5) Section 882(d)(1)(A) is amended—

(A) by striking “, (ii) rents” and inserting “and (ii) rents”, and

(B) by striking “, and (iii) gains described in section 631(b) or (c)”.

(6) Section 1231(b) is amended by striking paragraph (2).

(7) Section 1402(a)(3) is amended by inserting “or” at the end of subparagraph (A) and by striking subparagraph (B) and redesignating subparagraph (C) as subparagraph (B).

(8) Section 1441 is amended—

(A) in subsection (b), by striking “, gains described in section 631(b) or (c)”, and

(B) in subsection (c)(5), by striking “gains described in section 631(b) or (c), gains subject to tax under section 871(a)(1)(D),” and inserting “gains subject to tax under section 871(a)(1)(D)”.

(9) (A) Part IX of subchapter B of chapter 1 is amended by striking section 272 (and by striking the item relating to such section in the table of sections for such subpart).

(B) Section 1016(a) is amended by striking paragraph (15).

(c) Effective date.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2014.

(2) BASIS ADJUSTMENTS.—The amendment made by subsection (b)(9)(B) shall apply to deductions determined for taxable years beginning after December 31, 2014.

SEC. 3133. </