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H.R. 1: Tax Cuts and Jobs Act

The text of the bill below is as of Dec 14, 2017 (Passed the Senate with an Amendment).


115th CONGRESS

1st Session

H.R. 1

In the Senate of the United States,

December 2 (legislative day, December 1), 2017.

Amendment:

That the bill from the House of Representatives (H.R. 1) entitled An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018., do pass with the following

Strike all after the first word and insert the following:

TITLE

I
11000.

Short title, etc

(a)

Short title

This title may be cited as the Tax Cuts and Jobs Act.

(b)

Amendment of 1986 code

Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

A

Individual tax reform

I

Tax rate reform

11001.

Modification of rates

(a)

In general

Section 1 is amended by adding at the end the following new subsection:

(j)

Modifications for taxable years 2018 through 2025

(1)

In general

In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026—

(A)

subsection (i) shall not apply, and

(B)

this section (other than subsection (i)) shall be applied as provided in paragraphs (2) through (7).

(2)

Rate tables

(A)

Married individuals filing joint returns and surviving spouses

The following table shall be applied in lieu of the table contained in subsection (a):

If taxable income is:The tax is:
Not over $19,05010% of taxable income.
Over $19,050 but not over $77,400$1,905, plus 12% of the excess over $19,050.
Over $77,400 but not over $140,000$8,907, plus 22% of the excess over $77,400.
Over $140,000 but not over $320,000$22,679, plus 24% of the excess over $140,000.
Over $320,000 but not over $400,000$65,879, plus 32% of the excess over $320,000.
Over $400,000 but not over $1,000,000$91,479, plus 35% of the excess over $400,000.
Over $1,000,000$301,479, plus 38.5% of the excess over $1,000,000.
(B)

Heads of households

The following table shall be applied in lieu of the table contained in subsection (b):

If taxable income is:The tax is:
Not over $13,60010% of taxable income.
Over $13,600 but not over $51,800$1,360, plus 12% of the excess over $13,600.
Over $51,800 but not over $70,000$5,944, plus 22% of the excess over $51,800.
Over $70,000 but not over $160,000$9,948, plus 24% of the excess over $70,000.
Over $160,000 but not over $200,000$31,548, plus 32% of the excess over $160,000.
Over $200,000 but not over $500,000$44,348, plus 35% of the excess over $200,000.
Over $500,000$149,348, plus 38.5% of the excess over $500,000.
(C)

Unmarried individuals other than surviving spouses and heads of households

The following table shall be applied in lieu of the table contained in subsection (c):

If taxable income is:The tax is:
Not over $9,52510% of taxable income.
Over $9,525 but not over $38,700$952.50, plus 12% of the excess over $9,525.
Over $38,700 but not over $70,000$4,453.50, plus 22% of the excess over $38,700.
Over $70,000 but not over $160,000$11,339.50, plus 24% of the excess over $70,000.
Over $160,000 but not over $200,000$32,939.50, plus 32% of the excess over $160,000.
Over $200,000 but not over $500,000$45,739.50, plus 35% of the excess over $200,000.
Over $500,000$150,739.50, plus 38.5% of the excess over $500,000.
(D)

Married individuals filing separate returns

The following table shall be applied in lieu of the table contained in subsection (d):

If taxable income is:The tax is:
Not over $9,52510% of taxable income.
Over $9,525 but not over $38,700$952.50, plus 12% of the excess over $9,525.
Over $38,700 but not over $70,000$4,453.50, plus 22% of the excess over $38,700.
Over $70,000 but not over $160,000$11,339.50, plus 24% of the excess over $70,000.
Over $160,000 but not over $200,000$32,939.50, plus 32% of the excess over $160,000.
Over $200,000 but not over $500,000$45,739.50, plus 35% of the excess over $200,000.
Over $500,000$150,739.50, plus 38.5% of the excess over $500,000.
(E)

Estates and trusts

The following table shall be applied in lieu of the table contained in subsection (e):

If taxable income is:The tax is:
Not over $2,55010% of taxable income.
Over $2,550 but not over $9,150$255, plus 24% of the excess over $2,550.
Over $9,150 but not over $12,500$1,839, plus 35% of the excess over $9,150.
Over $12,500$3,011.50, plus 38.5% of the excess over $12,500.
(F)

References to rate tables

Any reference in this title to a rate of tax under subsection (c) shall be treated as a reference to the corresponding rate bracket under subparagraph (C) of this paragraph, except that the reference in section 3402(q)(1) to the third lowest rate of tax applicable under subsection (c) shall be treated as a reference to the fourth lowest rate of tax under subparagraph (C).

(3)

Adjustments

(A)

No adjustment in 2018

The tables contained in paragraph (2) shall apply without adjustment for taxable years beginning after December 31, 2017, and before January 1, 2019.

(B)

Subsequent years

For taxable years beginning after December 31, 2018, the Secretary shall prescribe tables which shall apply in lieu of the tables contained in paragraph (2) in the same manner as under paragraphs (1) and (2) of subsection (f), except that in prescribing such tables—

(i)

subsection (f)(3) shall be applied by substituting calendar year 2017 for calendar year 2016 in subparagraph (A)(ii) thereof,

(ii)

subsection (f)(7)(B) shall apply to any unmarried individual other than a surviving spouse or head of household, and

(iii)

subsection (f)(8) shall not apply.

(4)

Special rules for certain children with unearned income

(A)

In general

In the case of a child to whom subsection (g) applies for the taxable year, the rules of subparagraphs (B) and (C) shall apply in lieu of the rule under subsection (g)(1).

(B)

Modifications to applicable rate brackets

In determining the amount of tax imposed by this section for the taxable year on a child described in subparagraph (A), the income tax table otherwise applicable under this subsection to the child shall be applied with the following modifications:

(i)

24-percent bracket

The maximum taxable income which is taxed at a rate below 24 percent shall not be more than the earned taxable income of such child.

(ii)

35-percent bracket

The maximum taxable income which is taxed at a rate below 35 percent shall not be more than the sum of—

(I)

the earned taxable income of such child, plus

(II)

the minimum taxable income for the 35-percent bracket in the table under paragraph (2)(E) (as adjusted under paragraph (3)) for the taxable year.

(iii)

38.5-percent bracket

The maximum taxable income which is taxed at a rate below 38.5 percent shall not be more than the sum of—

(I)

the earned taxable income of such child, plus

(II)

the minimum taxable income for the 38.5-percent bracket in the table under paragraph (2)(E) (as adjusted under paragraph (3)) for the taxable year.

(C)

Coordination with capital gains rates

For purposes of applying section 1(h) (after the modifications under paragraph (5))—

(i)

the maximum zero rate amount shall not be more than the sum of—

(I)

the earned taxable income of such child, plus

(II)

the amount in effect under paragraph (5)(B)(i)(IV) for the taxable year, and

(ii)

the maximum 15-percent rate amount shall not be more than the sum of—

(I)

the earned taxable income of such child, plus

(II)

the amount in effect under paragraph (5)(B)(ii)(IV) for the taxable year.

(D)

Earned taxable income

For purposes of this paragraph, the term earned taxable income means, with respect to any child for any taxable year, the taxable income of such child reduced (but not below zero) by the net unearned income (as defined in subsection (g)(4)) of such child.

(5)

Application of current income tax brackets to capital gains brackets

(A)

In general

Section 1(h)(1) shall be applied—

(i)

by substituting below the maximum zero rate amount for which would (without regard to this paragraph) be taxed at a rate below 25 percent in subparagraph (B)(i), and

(ii)

by substituting below the maximum 15-percent rate amount for which would (without regard to this paragraph) be taxed at a rate below 39.6 percent in subparagraph (C)(ii)(I).

(B)

Maximum amounts defined

For purposes of applying section 1(h) with the modifications described in subparagraph (A)—

(i)

Maximum zero rate amount

The maximum zero rate amount shall be—

(I)

in the case of a joint return or surviving spouse, $77,200,

(II)

in the case of an individual who is a head of household (as defined in section 2(b)), $51,700,

(III)

in the case of any other individual (other than an estate or trust), an amount equal to ½ of the amount in effect for the taxable year under subclause (I), and

(IV)

in the case of an estate or trust, $2,600.

(ii)

Maximum 15-percent rate amount

The maximum 15-percent rate amount shall be—

(I)

in the case of a joint return or surviving spouse, $479,000 (½ such amount in the case of a married individual filing a separate return),

(II)

in the case of an individual who is the head of a household (as defined in section 2(b)), $452,400,

(III)

in the case of any other individual (other than an estate or trust), $425,800, and

(IV)

in the case of an estate or trust, $12,700.

(C)

Inflation adjustment

In the case of any taxable year beginning after 2018, each of the dollar amounts in clauses (i) and (ii) of subparagraph (B) shall be increased by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under subsection (f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2017 for calendar year 2016 in subparagraph (A)(ii) thereof.

(6)

Section 15 not to apply

Section 15 shall not apply to any change in a rate of tax by reason of this subsection.

.

(b)

Due diligence tax preparer requirement with respect to head of household filing status

Subsection (g) of section 6695 is amended to read as follows:

(g)

Failure To be diligent in determining eligibility for certain tax benefits

Any person who is a tax return preparer with respect to any return or claim for refund who fails to comply with due diligence requirements imposed by the Secretary by regulations with respect to determining—

(1)

eligibility to file as a head of household (as defined in section 2(b)) on the return, or

(2)

eligibility for, or the amount of, the credit allowable by section 24, 25A(a)(1), or 32,

shall pay a penalty of $500 for each such failure.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

11002.

Inflation adjustments based on chained CPI

(a)

In general

Subsection (f) of section 1 is amended by striking paragraph (3) and by inserting after paragraph (2) the following new paragraph:

(3)

Cost-of-living adjustment

For purposes of this subsection—

(A)

In general

The cost-of-living adjustment for any calendar year is the percentage (if any) by which—

(i)

the C–CPI–U for the preceding calendar year, exceeds

(ii)

the CPI for calendar year 2016, multiplied by the amount determined under subparagraph (B).

(B)

Amount determined

The amount determined under this clause is the amount obtained by dividing—

(i)

the C–CPI–U for calendar year 2016, by

(ii)

the CPI for calendar year 2016.

(C)

Special rule for adjustments with a base year after 2016

For purposes of any provision of this title which provides for the substitution of a year after 2016 for 2016 in subparagraph (A)(ii), subparagraph (A) shall be applied by substituting the C–CPI–U for calendar year 2016 for the CPI for calendar year 2016 and all that follows in clause (ii) thereof.

.

(b)

C–CPI–U

Subsection (f) of section 1 is amended by striking paragraph (7), by redesignating paragraph (6) as paragraph (7), and by inserting after paragraph (5) the following new paragraph:

(6)

C–CPI–U

For purposes of this subsection—

(A)

In general

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

(B)

Determination for calendar year

The C–CPI–U for any calendar year is the average of the C–CPI–U as of the close of the 12-month period ending on August 31 of such calendar year.

.

(c)

Application To permanent tax tables

Section 1(f)(2)(A) is amended by inserting , determined by substituting 1992 for 2016 in paragraph (3)(A)(ii).

(d)

Application to other Internal Revenue Code of 1986 provisions

(1)

The following sections are each amended by striking for calendar year 1992 in subparagraph (B) and inserting for calendar year 2016 in subparagraph (A)(ii):

(A)

Section 23(h)(2).

(B)

Paragraphs (1)(A)(ii) and (2)(A)(ii) of section 25A(h).

(C)

Section 25B(b)(3)(B).

(D)

Subsection (b)(2)(B)(ii)(II), and clauses (i) and (ii) of subsection (j)(1)(B), of section 32.

(E)

Section 36B(f)(2)(B)(ii)(II).

(F)

Section 41(e)(5)(C)(i).

(G)

Subsections (e)(3)(D)(ii) and (h)(3)(H)(i)(II) of section 42.

(H)

Section 45R(d)(3)(B)(ii).

(I)

Section 55(d)(4)(A)(ii).

(J)

Section 62(d)(3)(B).

(K)

Section 63(c)(4)(B).

(L)

Section 125(i)(2)(B).

(M)

Section 135(b)(2)(B)(ii).

(N)

Section 137(f)(2).

(O)

Section 146(d)(2)(B).

(P)

Section 147(c)(2)(H)(ii).

(Q)

Section 151(d)(4)(B).

(R)

Section 179(b)(6)(A)(ii).

(S)

Subsections (b)(5)(C)(i)(II) and (g)(8)(B) of section 219.

(T)

Section 220(g)(2).

(U)

Section 221(f)(1)(B).

(V)

Section 223(g)(1)(B).

(W)

Section 408A(c)(3)(D)(ii).

(X)

Section 430(c)(7)(D)(vii)(II).

(Y)

Section 512(d)(2)(B).

(Z)

Section 513(h)(2)(C)(ii).

(AA)

Section 831(b)(2)(D)(ii).

(BB)

Section 877A(a)(3)(B)(i)(II).

(CC)

Section 2010(c)(3)(B)(ii).

(DD)

Section 2032A(a)(3)(B).

(EE)

Section 2503(b)(2)(B).

(FF)

Section 4261(e)(4)(A)(ii).

(GG)

Section 5000A(c)(3)(D)(ii).

(HH)

Section 6323(i)(4)(B).

(II)

Section 6334(g)(1)(B).

(JJ)

Section 6601(j)(3)(B).

(KK)

Section 6651(i)(1).

(LL)

Section 6652(c)(7)(A).

(MM)

Section 6695(h)(1).

(NN)

Section 6698(e)(1).

(OO)

Section 6699(e)(1).

(PP)

Section 6721(f)(1).

(QQ)

Section 6722(f)(1).

(RR)

Section 7345(f)(2).

(SS)

Section 7430(c)(1).

(TT)

Section 9831(d)(2)(D)(ii)(II).

(2)

Sections 41(e)(5)(C)(ii) and 68(b)(2)(B) are each amended—

(A)

by striking 1(f)(3)(B) and inserting 1(f)(3)(A)(ii), and

(B)

by striking 1992 and inserting 2016.

(3)

Section 42(h)(6)(G) is amended—

(A)

by striking for calendar year 1987 in clause (i)(II) and inserting for calendar year 2016 in subparagraph (A)(ii) thereof, and

(B)

by striking if the CPI for any calendar year and all that follows in clause (ii) and inserting if the C–CPI–U for any calendar year (as defined in section 1(f)(6)) exceeds the C–CPI–U for the preceding calendar year by more than 5 percent, the C–CPI–U for the base calendar year shall be increased such that such excess shall never be taken into account under clause (i). In the case of a base calendar year before 2017, the C–CPI–U for such year shall be determined by multiplying the CPI for such year by the amount determined under section 1(f)(3)(B)..

(4)

Section 59(j)(2)(B) is amended by striking for 1992 in subparagraph (B) and inserting for 2016 in subparagraph (A)(ii).

(5)

Section 132(f)(6)(A)(ii) is amended by striking for calendar year 1992 and inserting for calendar year 2016 in subparagraph (A)(ii) thereof.

(6)

Section 162(o)(3) is amended by striking adjusted for changes in the Consumer Price Index (as defined in section 1(f)(5)) since 1991 and inserting “adjusted by increasing any such amount under the 1991 agreement by an amount equal to—

(A)

such amount, multiplied by

(B)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 1990 for calendar year 2016 in subparagraph (A)(ii) thereof

.

(7)

So much of clause (ii) of section 213(d)(10)(B) as precedes the last sentence is amended to read as follows:

(ii)

Medical care cost adjustment

For purposes of clause (i), the medical care cost adjustment for any calendar year is the percentage (if any) by which—

(I)

the medical care component of the C–CPI–U (as defined in section 1(f)(6)) for August of the preceding calendar year, exceeds

(II)

such component of the CPI (as defined in section 1(f)(4)) for August of 1996, multiplied by the amount determined under section 1(f)(3)(B).

.

(8)

Subparagraph (B) of section 280F(d)(7) is amended to read as follows:

(B)

Automobile price inflation adjustment

For purposes of this paragraph—

(i)

In general

The automobile price inflation adjustment for any calendar year is the percentage (if any) by which—

(I)

the C–CPI–U automobile component for October of the preceding calendar year, exceeds

(II)

the automobile component of the CPI (as defined in section 1(f)(4)) for October of 1987, multiplied by the amount determined under 1(f)(3)(B).

(ii)

C–CPI–U automobile component

The term C–CPI–U automobile component means the automobile component of the Chained Consumer Price Index for All Urban Consumers (as described in section 1(f)(6)).

.

(9)

Section 911(b)(2)(D)(ii)(II) is amended by striking for 1992 in subparagraph (B) and inserting for 2016 in subparagraph (A)(ii).

(10)

Paragraph (2) of section 1274A(d) is amended to read as follows:

(2)

Adjustment for inflation

In the case of any debt instrument arising out of a sale or exchange during any calendar year after 1989, each dollar amount contained in the preceding provisions of this section shall be increased by an amount equal to—

(A)

such amount, multiplied by

(B)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 1988 for calendar year 2016 in subparagraph (A)(ii) thereof.

Any increase under the preceding sentence shall be rounded to the nearest multiple of $100 (or, if such increase is a multiple of $50, such increase shall be increased to the nearest multiple of $100).

.

(11)

Section 4161(b)(2)(C)(i)(II) is amended by striking for 1992 in subparagraph (B) and inserting for 2016 in subparagraph (A)(ii).

(12)

Section 4980I(b)(3)(C)(v)(II) is amended by striking for 1992 in subparagraph (B) and inserting for 2016 in subparagraph (A)(ii).

(13)

Section 6039F(d) is amended by striking subparagraph (B) thereof shall be applied by substituting 1995 for 1992 and inserting subparagraph (A)(ii) thereof shall be applied by substituting 1995 for 2016.

(14)

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

(5)

Adjustment of limit for inflation

In the case of any loan made during any calendar year after 1986, the dollar amount in paragraph (2) shall be increased by an amount equal to—

(A)

such amount, multiplied by

(B)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 1985 for calendar year 2016 in subparagraph (A)(ii) thereof.

Any increase under the preceding sentence shall be rounded to the nearest multiple of $100 (or, if such increase is a multiple of $50, such increase shall be increased to the nearest multiple of $100).

.

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

II

Deduction for qualified business income of pass-thru entities

11011.

Deduction for qualified business income

(a)

In general

Part VI of subchapter B of chapter 1 is amended by adding at the end the following new section:

199A.

Qualified business income

(a)

In general

In the case of a taxpayer other than a corporation, there shall be allowed as a deduction for any taxable year an amount equal to the lesser of—

(1)

the combined qualified business income amount of the taxpayer, or

(2)

an amount equal to 23 percent of the excess (if any) of—

(A)

the taxable income of the taxpayer for the taxable year, over

(B)

any net capital gain (as defined in section 1(h)) of the taxpayer for the taxable year.

(b)

Combined qualified business income amount

For purposes of this section—

(1)

In general

The term combined qualified business income amount means, with respect to any taxable year, an amount equal to—

(A)

the sum of the amounts determined under paragraph (2) for each qualified trade or business carried on by the taxpayer, plus

(B)

23 percent of the aggregate amount of the qualified REIT dividends and qualified cooperative dividends of the taxpayer for the taxable year.

(2)

Determination of deductible amount for each trade or business

The amount determined under this paragraph with respect to any qualified trade or business is the lesser of—

(A)

23 percent of the taxpayer's qualified business income with respect to the qualified trade or business, or

(B)

50 percent of the W–2 wages with respect to the qualified trade or business.

(3)

Modifications to the wage limit based on taxable income

(A)

Exception from wage limit

In the case of any taxpayer whose taxable income for the taxable year does not exceed the threshold amount, paragraph (2) shall be applied without regard to subparagraph (B).

(B)

Phase-in of limit for certain taxpayers

(i)

In general

If—

(I)

the taxable income of a taxpayer for any taxable year exceeds the threshold amount, but does not exceed the sum of the threshold amount plus $50,000 ($100,000 in the case of a joint return), and

(II)

the amount determined under paragraph (2)(B) (determined without regard to this subparagraph) with respect to any qualified trade or business carried on by the taxpayer is less than the amount determined under paragraph (2)(A) with respect such trade or business,

then paragraph (2) shall be applied with respect to such trade or business without regard to subparagraph (B) thereof and by reducing the amount determined under subparagraph (A) thereof by the amount determined under clause (ii).
(ii)

Amount of reduction

The amount determined under this subparagraph is the amount which bears the same ratio to the excess amount as—

(I)

the amount by which the taxpayer's taxable income for the taxable year exceeds the threshold amount, bears to

(II)

$50,000 ($100,000 in the case of a joint return).

(iii)

Excess amount

For purposes of clause (ii), the excess amount is the excess of—

(I)

the amount determined under paragraph (2)(A) (determined without regard to this paragraph), over

(II)

the amount determined under paragraph (2)(B) (determined without regard to this paragraph).

(4)

Wages, etc

(A)

In general

The term W–2 wages means, with respect to any person for any taxable year of such person, the amounts described in paragraphs (3) and (8) of section 6051(a) paid by such person with respect to employment of employees by such person during the calendar year ending during such taxable year.

(B)

Limitation to wages attributable to qualified business income

Such term shall not include any amount which is not properly allocable to qualified business income for purposes of subsection (c)(1).

(C)

Return requirement

Such term shall not include any amount which is not properly included in a return filed with the Social Security Administration on or before the 60th day after the due date (including extensions) for such return.

(5)

Acquisitions, dispositions, and short taxable years

The Secretary shall provide for the application of this subsection in cases of a short taxable year or where the taxpayer acquires, or disposes of, the major portion of a trade or business or the major portion of a separate unit of a trade or business during the taxable year.

(c)

Qualified business income

For purposes of this section—

(1)

In general

The term qualified business income means, for any taxable year, the net amount of qualified items of income, gain, deduction, and loss with respect to any qualified trade or business of the taxpayer.

(2)

Carryover of losses

If the net amount of qualified income, gain, deduction, and loss with respect to qualified trade or businesses of the taxpayer amount for any taxable year is less than zero, such amount shall be treated as a loss from a qualified trade or business in the succeeding taxable year.

(3)

Qualified items of income, gain, deduction, and loss

For purposes of this subsection—

(A)

In general

The term qualified items of income, gain, deduction, and loss means items of income, gain, deduction, and loss to the extent such items are—

(i)

effectively connected with the conduct of a trade or business within the United States (within the meaning of section 864(c), determined by substituting qualified trade or business (within the meaning of section 199A) for nonresident alien individual or a foreign corporation or for a foreign corporation each place it appears), and

(ii)

included or allowed in determining taxable income for the taxable year.

(B)

Exceptions

The following investment items shall not be taken into account as a qualified item of income, gain, deduction, or loss:

(i)

Any item of short-term capital gain, short-term capital loss, long-term capital gain, or long-term capital loss.

(ii)

Any dividend, income equivalent to a dividend, or payment in lieu of dividends described in section 954(c)(1)(G).

(iii)

Any interest income other than interest income which is properly allocable to a trade or business.

(iv)

Any item of gain or loss described in subparagraph (C) or (D) of section 954(c)(1) (applied by substituting qualified trade or business for controlled foreign corporation).

(v)

Any item of income, gain, deduction, or loss taken into account under section 954(c)(1)(F) (determined without regard to clause (ii) thereof and other than items attributable to notional principal contracts entered into in transactions qualifying under section 1221(a)(7)).

(vi)

Any amount received from an annuity which is not received in connection with the trade or business.

(vii)

Any item of deduction or loss properly allocable to an amount described in any of the preceding clauses.

(4)

Treatment of reasonable compensation and guaranteed payments

Qualified business income shall not include—

(A)

reasonable compensation paid to the taxpayer by any qualified trade or business of the taxpayer for services rendered with respect to the trade or business,

(B)

any guaranteed payment described in section 707(c) paid to a partner for services rendered with respect to the trade or business, and

(C)

to the extent provided in regulations, any payment described in section 707(a) to a partner for services rendered with respect to the trade or business.

(d)

Qualified trade or business

For purposes of this section—

(1)

In general

The term qualified trade or business means any trade or business other than a specified service trade or business or the trade or business of performing services as an employee.

(2)

Specified service trade or business

The term specified service trade or business means any trade or business involving the performance of services described in section 1202(e)(3)(A), including investing and investment management, trading, or dealing in securities (as defined in section 475(c)(2)), partnership interests, or commodities (as defined in section 475(e)(2)).

(3)

Exception for specified service businesses based on taxpayer's income

(A)

In general

If, for any taxable year, the taxable income of any taxpayer is less than the sum of the threshold amount plus $50,000 ($100,000 in the case of a joint return), then—

(i)

the exception under paragraph (1) shall not apply to specified service trades or businesses of the taxpayer for the taxable year, but

(ii)

only the applicable percentage of qualified items of income, gain, deduction, or loss, and the W–2 wages, of the taxpayer allocable to such specified service trades or businesses shall be taken into account in computing the qualified business income and W–2 wages of the taxpayer for the taxable year for purposes of applying this section.

(B)

Applicable percentage

For purposes of subparagraph (A), the term applicable percentage means, with respect to any taxable year, 100 percent reduced (not below zero) by the percentage equal to the ratio of—

(i)

the taxable income of the taxpayer for the taxable year in excess of the threshold amount, bears to

(ii)

$50,000 ($100,000 in the case of a joint return).

(e)

Other definitions

For purposes of this section—

(1)

Taxable income

Taxable income shall be computed without regard to the deduction allowable under this section.

(2)

Threshold amount

(A)

In general

The term threshold amount means $250,000 (200 percent of such amount in the case of a joint return).

(B)

Inflation adjustment

In the case of any taxable year beginning after 2018, the dollar amount in paragraph (1) shall be increased by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2017 for calendar year 2016 in subparagraph (A)(ii) thereof.

If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the nearest multiple of $1,000.
(3)

Qualified REIT dividend

The term qualified REIT dividend means any dividend from a real estate investment trust received during the taxable year which—

(A)

is not a capital gain dividend, as defined in section 857(b)(3), and

(B)

is not qualified dividend income, as defined in section 1(h)(11).

(4)

Qualified cooperative dividend

The term qualified cooperative dividend means any patronage dividend (as defined in section 1388(a)), any per-unit retain allocation (as defined in section 1388(f)), and any qualified written notice of allocation (as defined in section 1388(c)), or any similar amount received from an organization described in subparagraph (B)(ii), which—

(A)

is includible in gross income, and

(B)

is received from—

(i)

an organization or corporation described in section 501(c)(12) or 1381(a), or

(ii)

an organization which is governed under this title by the rules applicable to cooperatives under this title before the enactment of subchapter T.

(f)

Special rules

(1)

Application to partnerships and S corporations

(A)

In general

In the case of a partnership or S corporation—

(i)

this section shall be applied at the partner or shareholder level,

(ii)

each partner or shareholder shall take into account such person's allocable share of each qualified item of income, gain, deduction, and loss, and

(iii)

each partner or shareholder shall be treated for purposes of subsection (b) as having W–2 wages for the taxable year in an amount equal to such person's allocable share of the W–2 wages of the partnership or S corporation for the taxable year (as determined under regulations prescribed by the Secretary).

For purposes of clause (iii), a partner's or shareholder's allocable share of W–2 wages shall be determined in the same manner as the partner's or shareholder's allocable share of wage expenses. For purposes of this subparagraph, in the case of an S corporation, an allocable share shall be the shareholder's pro rata share of an item.
(B)

Application to trusts and estates

This section shall not apply to any trust or estate.

(C)

Treatment of trades or business in Puerto Rico

(i)

In general

In the case of any taxpayer with qualified business income from sources within the commonwealth of Puerto Rico, if all such income is taxable under section 1 for such taxable year, then for purposes of determining the qualified business income of such taxpayer for such taxable year, the term United States shall include the Commonwealth of Puerto Rico.

(ii)

Special rule for applying wage limitation

In the case of any taxpayer described in clause (i), the determination of W–2 wages of such taxpayer with respect to any qualified trade or business conducted in Puerto Rico shall be made without regard to any exclusion under section 3401(a)(8) for remuneration paid for services in Puerto Rico.

(2)

Coordination with minimum tax

For purposes of determining alternative minimum taxable income under section 55, qualified business income shall be determined without regard to any adjustments under sections 56 through 59.

(3)

Deduction limited to income taxes

The deduction under subsection (a) shall only be allowed for purposes of this chapter.

(4)

Regulations

The Secretary shall prescribe such regulations as are necessary to carry out the purposes of this section, including regulations—

(A)

for requiring or restricting the allocation of items and wages under this section and such reporting requirements as the Secretary determines appropriate, and

(B)

for the application of this section in the case of tiered entities.

(g)

Deduction allowed to specified agricultural or horticultural cooperatives

(1)

In general

In the case of any taxable year of a specified agricultural or horticultural cooperative beginning after December 31, 2018, there shall be allowed a deduction in an amount equal to the lesser of—

(A)

23 percent of the cooperative's taxable income for the taxable year, or

(B)

50 percent of the W–2 wages of the cooperative with respect to its trade or business.

(2)

Specified agricultural or horticultural cooperative

For purposes of this subsection, the term specified agricultural or horticultural cooperative means an organization to which part I of subchapter T applies which is engaged in—

(A)

the manufacturing, production, growth, or extraction in whole or significant part of any agricultural or horticultural product,

(B)

the marketing of agricultural or horticultural products which its patrons have so manufactured, produced, grown, or extracted, or

(C)

the provision of supplies, equipment, or services to farmers or to organizations described in subparagraph (A) or (B).

(h)

Termination

This section shall not apply to taxable years beginning after December 31, 2025.

.

(b)

Application to publicly traded partnerships

(1)

In general

Section 199A(b)(1)(B), as added by subsection (a), is amended by striking and qualified cooperative dividends and inserting , qualified cooperative dividends, and qualified publicly traded partnership income.

(2)

Qualified publicly traded partnership income

Section 199A(e), as added by subsection (a), is amended by adding at the end the following new paragraph:

(5)

Qualified publicly traded partnership income

The term qualified publicly traded partnership income means, with respect to any qualified trade or business of a taxpayer, the sum of—

(A)

the net amount of such taxpayer's allocable share of each qualified item of income, gain, deduction, and loss (as defined in subsection (c)(3) and determined after the application of subsection (c)(4)) from a publicly traded partnership (as defined in section 7704(a)) which is not treated as a corporation under section 7704(c), plus

(B)

any gain recognized by such taxpayer upon disposition of its interest in such partnership to the extent such gain is treated as an amount realized from the sale or exchange of property other than a capital asset under section 751(a).

.

(3)

Conforming amendment

Section 199A(c)(1), as added by subsection (a), is amended by adding at the end the following new sentence: Such term shall not include any qualified publicly traded partnership income..

(c)

Accuracy-related penalty on determination of applicable percentage

Section 6662(d)(1) is amended by inserting at the end the following new subparagraph:

(C)

Special rule for taxpayers claiming section 199A deduction

In the case of any taxpayer who claims the deduction allowed under section 199A for the taxable year, subparagraph (A) shall be applied by substituting 5 percent for 10 percent.

.

(d)

Conforming amendments

(1)

Section 170(b)(2)(D) is amended by striking , and at the end of clause (iv), by redesignating clause (v) as clause (vi), and by inserting after clause (iv) the following new clause:

(v)

section 199A, and

.

(2)

Section 172(d) is amended by adding at the end the following new paragraph:

(8)

Qualified business income deduction

The deduction under section 199A shall not be allowed.

.

(3)

Section 246(b)(1) is amended by inserting 199A, before 243(a)(1).

(4)

Section 613(a) is amended by inserting and without the deduction under section 199A after and without the deduction under section 199.

(5)

Section 613A(d)(1) is amended by redesignating subparagraphs (C), (D), and (E) as subparagraphs (D), (E), and (F), respectively, and by inserting after subparagraph (B), the following new subparagraph:

(C)

any deduction allowable under section 199A,

.

(6)

The table of sections for part VI of subchapter B of chapter 1 is amended by inserting at the end the following new item:

Sec. 199A. Qualified business income.

.

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

11012.

Limitation on losses for taxpayers other than corporations

(a)

In general

Section 461 is amended by adding at the end the following new subsection:

(l)

Limitation on excess business losses of noncorporate taxpayers

(1)

Limitation

In the case of taxable year of a taxpayer other than a corporation beginning after December 31, 2017, and before January 1, 2026—

(A)

subsection (j) (relating to limitation on excess farm losses of certain taxpayers) shall not apply, and

(B)

any excess business loss of the taxpayer for the taxable year shall not be allowed.

(2)

Disallowed loss carryover

Any loss which is disallowed under paragraph (1) shall be treated as a net operating loss carryover to the following taxable year under section 172.

(3)

Excess business loss

For purposes of this subsection—

(A)

In general

The term excess business loss means the excess (if any) of—

(i)

the aggregate deductions of the taxpayer for the taxable year which are attributable to trades or businesses of such taxpayer (determined without regard to whether or not such deductions are disallowed for such taxable year under paragraph (1)), over

(ii)

the sum of—

(I)

the aggregate gross income or gain of such taxpayer for the taxable year which is attributable to such trades or businesses, plus

(II)

$250,000 (200 percent of such amount in the case of a joint return).

(B)

Adjustment for inflation

In the case of any taxable year beginning after December 31, 2018, the $250,000 amount in subparagraph (A)(ii)(II) shall be increased by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2017 for 2016 in subparagraph (A)(ii) thereof.

If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the nearest multiple of $1,000.
(4)

Application of subsection in case of partnerships and s corporations

In the case of a partnership or S corporation—

(A)

this subsection shall be applied at the partner or shareholder level, and

(B)

each partner's or shareholder's allocable share of the items of income, gain, deduction, or loss of the partnership or S corporation for any taxable year from trades or businesses attributable to the partnership or S corporation shall be taken into account by the partner or shareholder in applying this subsection to the taxable year of such partner or shareholder with or within which the taxable year of the partnership or S corporation ends.

For purposes of this paragraph, in the case of an S corporation, an allocable share shall be the shareholder’s pro rata share of an item.
(5)

Additional reporting

The Secretary shall prescribe such additional reporting requirements as the Secretary determines appropriate to carry out the purposes of this subsection.

(6)

Coordination with section 469

This subsection shall be applied after the application of section 469.

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

III

Tax benefits for families and individuals

11021.

Increase in standard deduction

(a)

In general

Subsection (c) of section 63 is amended by adding at the end the following new paragraph:

(7)

Special rules for taxable years 2018 through 2025

In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026—

(A)

Increase in standard deduction

Paragraph (2) shall be applied—

(i)

by substituting $18,000 for $4,400 in subparagraph (B), and

(ii)

by substituting $12,000 for $3,000 in subparagraph (C).

(B)

Adjustment for inflation

(i)

In general

Paragraph (4) shall not apply to the dollar amounts contained in paragraphs (2)(B) and (2)(C).

(ii)

Adjustment of increased amounts

In the case of a taxable year beginning after 2018, the $18,000 and $12,000 amounts in subparagraph (A) shall each be increased by an amount equal to—

(I)

such dollar amount, multiplied by

(II)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2017 for 2016 in subparagraph (A)(ii) thereof.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

11022.

Increase in and modification of child tax credit

(a)

In general

Section 24 is amended by adding at the end the following new subsection:

(h)

Special rules for taxable years 2018 through 2025

(1)

In general

In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026, this section shall be applied as provided in paragraphs (2), (3), (5), (6), (7), and (8). In the case of taxable year beginning after December 31, 2017 and before January 1, 2025, this section shall be applied as provided in paragraph (4).

(2)

Credit amount

Subsection (a) shall be applied by substituting $2,000 for $1,000.

(3)

Limitation

In lieu of the amount determined under subsection (b)(2), the threshold amount shall be $500,000.

(4)

Definition of qualifying child

Paragraph (1) of subsection (c) shall be applied by substituting 18 for 17.

(5)

Partial credit allowed for certain other dependents

(A)

In general

The credit determined under subsection (a) (after the application of paragraph (2)) shall be increased by $500 for each dependent of the taxpayer (as defined in section 152) other than a qualifying child described in subsection (c) (after the application of paragraph (4)).

(B)

Exception for certain noncitizens

Subparagraph (A) shall not apply with respect to any individual who would not be a dependent if subparagraph (A) of section 152(b)(3) were applied without regard to all that follows resident of the United States.

(6)

Maximum amount of refundable credit

(A)

In general

Subsection (d)(1)(A) shall be applied without regard to paragraphs (2) and (5) of this subsection.

(B)

Adjustment for inflation

In the case of a taxable year beginning after 2017, subsection (d)(1)(A) shall be applied as if the $1,000 amount in subsection (a) were increased (but not to exceed the amount under paragraph (2) of this subsection) by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins.

Any increase determined under the preceding sentence shall be rounded to the next highest multiple of $100.
(7)

Earned income threshold for refundable credit

Subsection (d)(1)(B)(i) shall be applied by substituting $2,500 for $3,000.

(8)

Social security number required

No credit shall be allowed under subsection (d) to a taxpayer with respect to any qualifying child unless the taxpayer includes the social security number of such child on the return of tax for the taxable year. For purposes of the preceding sentence, the term social security number means a social security number issued to an individual by the Social Security Administration, but only if the social security number is issued to a citizen of the United States or is issued pursuant to subclause (I) (or that portion of subclause (III) that relates to subclause (I)) of section 205(c)(2)(B)(i) of the Social Security Act.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

11023.

Increased limitation for certain charitable contributions

(a)

In general

Section 170(b)(1) is amended by redesignating subparagraph (G) as subparagraph (H) and by inserting after subparagraph (F) the following new subparagraph:

(G)

Increased limitation for cash contributions

(i)

In general

In the case of any contribution of cash to an organization described in subparagraph (A), the total amount of such contributions which may be taken into account under subsection (a) for any taxable year beginning after December 31, 2017, and before January 1, 2026, shall not exceed 60 percent of the taxpayer’s contribution base for such year.

(ii)

Carryover

If the aggregate amount of contributions described in clause (i) exceeds the applicable limitation under clause (i) for any taxable year described in such clause, such excess shall be treated (in a manner consistent with the rules of subsection (d)(1)) as a charitable contribution to which clause (i) applies in each of the 5 succeeding years in order of time.

(iii)

Coordination with subparagraphs (a) and (b)

(I)

In general

Contributions taken into account under this subparagraph shall not be taken into account under subparagraph (A).

(II)

Limitation reduction

For each taxable year described in clause (i), and each taxable year to which any contribution under this subparagraph is carried over under clause (ii), subparagraph (A) shall be applied by reducing (but not below zero) the contribution limitation allowed for the taxable year under such subparagraph by the aggregate contributions allowed under this subparagraph for such taxable year, and subparagraph (B) shall be applied by treating any reference to subparagraph (A) as a reference to both subparagraph (A) and this subparagraph.

.

(b)

Effective date

The amendment made by this section shall apply to contributions in taxable years beginning after December 31, 2017.

11024.

Increased contributions to ABLE accounts

(a)

Increase in limitation for contributions from compensation of individuals with disabilities

(1)

In general

Section 529A(b)(2)(B) is amended to read as follows:

(B)

except in the case of contributions under subsection (c)(1)(C), if such contribution to an ABLE account would result in aggregate contributions from all contributors to the ABLE account for the taxable year exceeding the sum of—

(i)

the amount in effect under section 2503(b) for the calendar year in which the taxable year begins, plus

(ii)

in the case of any contribution by a designated beneficiary described in paragraph (7) before January 1, 2026, the lesser of—

(I)

compensation (as defined by section 219(f)(1)) includible in the designated beneficiary's gross income for the taxable year, or

(II)

an amount equal to the poverty line for a one-person household, as determined for the calendar year preceding the calendar year in which the taxable year begins.

.

(2)

Responsibility for contribution limitation

Paragraph (2) of section 529A(b) is amended by adding at the end the following: A designated beneficiary (or a person acting on behalf of such beneficiary) shall maintain adequate records for purposes of ensuring, and shall be responsible for ensuring, that the requirements of subparagraph (B)(ii) are met.

(3)

Eligible designated beneficiary

Section 529A(b) is amended by adding at the end the following:

(7)

Special rules related to contribution limit

For purposes of paragraph (2)(B)(ii)—

(A)

Designated beneficiary

A designated beneficiary described in this paragraph is an employee (including an employee within the meaning of section 401(c)) with respect to whom—

(i)

no contribution is made for the taxable year to a defined contribution plan (within the meaning of section 414(i)) with respect to which the requirements of section 401(a) or 403(a) are met,

(ii)

no contribution is made for the taxable year to an annuity contract described in section 403(b), and

(iii)

no contribution is made for the taxable year to an eligible deferred compensation plan described in section 457(b).

(B)

Poverty line

The term poverty line has the meaning given such term by section 673 of the Community Services Block Grant Act (42 U.S.C. 9902).

.

(b)

Allowance of saver’s credit for ABLE contributions by account holder

Section 25B(d)(1) is amended by striking and at the end of subparagraph (B)(ii), by striking the period at the end of subparagraph (C) and inserting , and, and by inserting at the end the following:

(D)

the amount of contributions made before January 1, 2026, by such individual to the ABLE account (within the meaning of section 529A) of which such individual is the designated beneficiary.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

11025.

Rollovers to ABLE programs from 529 programs

(a)

In general

Clause (i) of section 529(c)(3)(C) is amended by striking or at the end of subclause (I), by striking the period at the end of subclause (II) and inserting , or, and by adding at the end the following:

(III)

before January 1, 2026, to an ABLE account (as defined in section 529A(e)(6)) of the designated beneficiary or a member of the family of the designated beneficiary.

Subclause (III) shall not apply to so much of a distribution which, when added to all other contributions made to the ABLE account for the taxable year, exceeds the limitation under section 529A(b)(2)(B)(i).

.

(b)

Effective date

The amendments made by this section shall apply to distributions after the date of the enactment of this Act.

11026.

Treatment of certain individuals performing services in the Sinai Peninsula of Egypt

(a)

In general

For purposes of the following provisions of the Internal Revenue Code of 1986, with respect to the applicable period, a qualified hazardous duty area shall be treated in the same manner as if it were a combat zone (as determined under section 112 of such Code):

(1)

Section 2(a)(3) (relating to special rule where deceased spouse was in missing status).

(2)

Section 112 (relating to the exclusion of certain combat pay of members of the Armed Forces).

(3)

Section 692 (relating to income taxes of members of Armed Forces on death).

(4)

Section 2201 (relating to members of the Armed Forces dying in combat zone or by reason of combat-zone-incurred wounds, etc.).

(5)

Section 3401(a)(1) (defining wages relating to combat pay for members of the Armed Forces).

(6)

Section 4253(d) (relating to the taxation of phone service originating from a combat zone from members of the Armed Forces).

(7)

Section 6013(f)(1) (relating to joint return where individual is in missing status).

(8)

Section 7508 (relating to time for performing certain acts postponed by reason of service in combat zone).

(b)

Qualified hazardous duty area

For purposes of this section, the term qualified hazardous duty area means the Sinai Peninsula of Egypt, if as of the date of the enactment of this section any member of the Armed Forces of the United States is entitled to special pay under section 310 of title 37, United States Code (relating to special pay; duty subject to hostile fire or imminent danger), for services performed in such location. Such term includes such location only during the period such entitlement is in effect.

(c)

Applicable period

(1)

In general

Except as provided in paragraph (2), the applicable period is—

(A)

the portion of the first taxable year ending after June 9, 2015, which begins on such date, and

(B)

any subsequent taxable year beginning before January 1, 2026.

(2)

Withholding

In the case of subsection (a)(5), the applicable period is—

(A)

the portion of the first taxable year ending after the date of the enactment of this Act which begins on such date, and

(B)

any subsequent taxable year beginning before January 1, 2026.

(d)

Effective date

(1)

In general

Except as provided in paragraph (2), the provisions of this section shall take effect on June 9, 2015.

(2)

Withholding

Subsection (a)(5) shall apply to remuneration paid after the date of the enactment of this Act.

11027.

Extension of waiver of limitations with respect to excluding from gross income amounts received by wrongfully incarcerated individuals

(a)

In general

Section 304(d) of the Protecting Americans from Tax Hikes Act of 2015 (26 U.S.C. 139F note) is amended by striking 1-year and inserting 2-year.

(b)

Effective date

The amendments made by this section shall take effect on the date of the enactment of this Act.

11028.

Temporary reduction in medical expense deduction floor

(a)

In general

Subsection (f) of section 213 is amended to read as follows:

(f)

Special rules for 2013 through 2018

In the case of any taxable year—

(1)

beginning after December 31, 2012, and ending before January 1, 2017, in the case of a taxpayer if such taxpayer or such taxpayer's spouse has attained age 65 before the close of such taxable year, and

(2)

beginning after December 31, 2016, and ending before January 1, 2019, in the case of any taxpayer,

subsection (a) shall be applied with respect to a taxpayer by substituting 7.5 percent for 10 percent.

.

(b)

Minimum tax preference not To apply

Section 56(b)(1)(B) is amended by adding at the end the following new sentence:This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019.

(c)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2016.

11029.

Relief for 2016 disaster areas

(a)

In general

For purposes of this section, the term 2016 disaster area means any area with respect to which a major disaster has been declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act during calendar year 2016.

(b)

Special rules for use of retirement funds with respect to areas damaged by 2016 disasters

(1)

Tax-Favored Withdrawals From Retirement Plans

(A)

In general

Section 72(t) of the Internal Revenue Code of 1986 shall not apply to any qualified 2016 disaster distribution.

(B)

Aggregate dollar limitation

(i)

In general

For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as qualified 2016 disaster distributions for any taxable year shall not exceed the excess (if any) of—

(I)

$100,000, over

(II)

the aggregate amounts treated as qualified 2016 disaster distributions received by such individual for all prior taxable years.

(ii)

Treatment of plan distributions

If a distribution to an individual would (without regard to clause (i)) be a qualified 2016 disaster distribution, a plan shall not be treated as violating any requirement of this title merely because the plan treats such distribution as a qualified 2016 disaster distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $100,000.

(iii)

Controlled group

For purposes of clause (ii), the term controlled group means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986.

(C)

Amount distributed may be repaid

(i)

In general

Any individual who receives a qualified 2016 disaster distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16) of the Internal Revenue Code of 1986, as the case may be.

(ii)

Treatment of repayments of distributions from eligible retirement plans other than iras

For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to clause (i) with respect to a qualified 2016 disaster distribution from an eligible retirement plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received the qualified 2016 disaster distribution in an eligible rollover distribution (as defined in section 402(c)(4) of the Internal Revenue Code of 1986) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.

(iii)

Treatment of repayments for distributions from iras

For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to clause (i) with respect to a qualified 2016 disaster distribution from an individual retirement plan (as defined by section 7701(a)(37) of the Internal Revenue Code of 1986), then, to the extent of the amount of the contribution, the qualified 2016 disaster distribution shall be treated as a distribution described in section 408(d)(3) of such Code and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.

(D)

Definitions

For purposes of this paragraph—

(i)

Qualified 2016 disaster distribution

Except as provided in subparagraph (B), the term qualified 2016 disaster distribution means any distribution from an eligible retirement plan made on or after January 1, 2016, and before January 1, 2018, to an individual whose principal place of abode at any time during calendar year 2016 was located in a disaster area described in subsection (a) and who has sustained an economic loss by reason of the events giving rise to the Presidential declaration described in subsection (a) which was applicable to such area.

(ii)

Eligible retirement plan

The term eligible retirement plan shall have the meaning given such term by section 402(c)(8)(B) of the Internal Revenue Code of 1986.

(E)

Income inclusion spread over 3-year period

(i)

In general

In the case of any qualified 2016 disaster distribution, unless the taxpayer elects not to have this subparagraph apply for any taxable year, any amount required to be included in gross income for such taxable year shall be so included ratably over the 3-taxable-year period beginning with such taxable year.

(ii)

Special rule

For purposes of clause (i), rules similar to the rules of subparagraph (E) of section 408A(d)(3) of the Internal Revenue Code of 1986 shall apply.

(F)

Special rules

(i)

Exemption of distributions from trustee to trustee transfer and withholding rules

For purposes of sections 401(a)(31), 402(f), and 3405 of the Internal Revenue Code of 1986, qualified 2016 disaster distribution shall not be treated as eligible rollover distributions.

(ii)

Qualified 2016 disaster distributions treated as meeting plan distribution requirements

For purposes of the Internal Revenue Code of 1986, a qualified 2016 disaster distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A) of the Internal Revenue Code of 1986.

(2)

Provisions Relating to Plan Amendments

(A)

In general

If this paragraph applies to any amendment to any plan or annuity contract, such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in subparagraph (B)(ii)(I).

(B)

Amendments to which subsection applies

(i)

In general

This paragraph shall apply to any amendment to any plan or annuity contract which is made—

(I)

pursuant to any provision of this section, or pursuant to any regulation under any provision of this section; and

(II)

on or before the last day of the first plan year beginning on or after January 1, 2018, or such later date as the Secretary prescribes.

In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), subclause (II) shall be applied by substituting the date which is 2 years after the date otherwise applied under subclause (II).
(ii)

Conditions

This paragraph shall not apply to any amendment unless—

(I)

during the period—

(aa)

beginning on the date that this section or the regulation described in clause (i)(I) takes effect (or in the case of a plan or contract amendment not required by this section or such regulation, the effective date specified by the plan); and

(bb)

ending on the date described in clause (i)(II) (or, if earlier, the date the plan or contract amendment is adopted),

the plan or contract is operated as if such plan or contract amendment were in effect; and
(II)

such plan or contract amendment applies retroactively for such period.

(c)

Special rules for personal casualty losses related to 2016 major disaster

(1)

In general

If an individual has a net disaster loss for any taxable year beginning after December 31, 2017, and before January 1, 2026—

(A)

the amount determined under section 165(h)(2)(A)(ii) of the Internal Revenue Code of 1986 shall be equal to the sum of—

(i)

such net disaster loss, and

(ii)

so much of the excess referred to in the matter preceding clause (i) of section 165(h)(2)(A) of such Code (reduced by the amount in clause (i) of this subparagraph) as exceeds 10 percent of the adjusted gross income of the individual,

(B)

section 165(h)(1) of such Code shall be applied by substituting $500 for $500 ($100 for taxable years beginning after December 31, 2009),

(C)

the standard deduction determined under section 63(c) of such Code shall be increased by the net disaster loss, and

(D)

section 56(b)(1)(E) of such Code shall not apply to so much of the standard deduction as is attributable to the increase under subparagraph (C) of this paragraph.

(2)

Net disaster loss

For purposes of this subsection, the term net disaster loss means the excess of qualified disaster-related personal casualty losses over personal casualty gains (as defined in section 165(h)(3)(A) of the Internal Revenue Code of 1986).

(3)

Qualified disaster-related personal casualty losses

For purposes of this paragraph, the term qualified disaster-related personal casualty losses means losses described in section 165(c)(3) of the Internal Revenue Code of 1986 which arise in a disaster area described in subsection (a) on or after January 1, 2016, and which are attributable to the events giving rise to the Presidential declaration described in subsection (a) which was applicable to such area.

IV

Education

11031.

Treatment of student loans discharged on account of death or disability

(a)

In general

Section 108(f) is amended by adding at the end the following new paragraph:

(5)

Discharges on account of death or disability

(A)

In general

In the case of an individual, gross income for any taxable year beginning after December 31, 2017, and before January 1, 2026, does not include any amount which (but for this subsection) would be includible in gross income for such taxable year by reasons of the discharge (in whole or in part) of any loan described in subparagraph (B) if such discharge was—

(i)

pursuant to subsection (a) or (d) of section 437 of the Higher Education Act of 1965 or the parallel benefit under part D of title IV of such Act (relating to the repayment of loan liability),

(ii)

pursuant to section 464(c)(1)(F) of such Act, or

(iii)

otherwise discharged on account of the death or total and permanent disability of the student.

(B)

Loans described

A loan is described in this subparagraph if such loan is—

(i)

a student loan (as defined in paragraph (2)), or

(ii)

a private education loan (as defined in section 140(7) of the Consumer Credit Protection Act (15 U.S.C. 1650(7))).

.

(b)

Effective date

The amendment made by this section shall apply to discharges of indebtedness after December 31, 2017.

11032.

Increase in deduction for teacher expenses

(a)

In general

Subparagraph (D) of section 62(a)(2) is amended by striking $250 and inserting $250 ($500 in the case of taxable years beginning after December 31, 2017, and before January 1, 2026).

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

11033.

529 account funding for elementary and secondary education

(a)

In general

(1)

In general

Section 529(c) is amended by adding at the end the following new paragraph:

(7)

Treatment of elementary and secondary tuition

Any reference in this subsection to the term qualified higher education expense shall include a reference to—

(A)

expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school, and

(B)

expenses for—

(i)

curriculum and curricular materials,

(ii)

books or other instructional materials,

(iii)

online educational materials,

(iv)

tuition for tutoring or educational classes outside of the home (but only if the tutor or instructor is not related to the student),

(v)

dual enrollment in an institution of higher education, and

(vi)

educational therapies for students with disabilities,

in connection with a homeschool (whether treated as a homeschool or a private school for purposes of applicable State law).

.

(2)

Limitation

Section 529(e)(3)(A) is amended by adding at the end the following: The amount of cash distributions from all qualified tuition programs described in subsection (b)(1)(A)(ii) with respect to a beneficiary during any taxable year shall, in the aggregate, include not more than $10,000 in expenses described in subsection (c)(7) incurred during the taxable year..

(b)

Effective date

The amendments made by subsection (a) shall apply to contributions made after December 31, 2017.

(c)

Offset

(1)

Modification of rules relating to hardship withdrawals from cash or deferred arrangements

Section 401(k) is amended by adding at the end the following:

(14)

Special rules relating to hardship withdrawals

For purposes of paragraph (2)(B)(i)(IV)—

(A)

Amounts which may be withdrawn

The following amounts may be distributed upon hardship of the employee:

(i)

Contributions to a profit-sharing or stock bonus plan to which section 402(e)(3) applies.

(ii)

Qualified nonelective contributions (as defined in subsection (m)(4)(C)).

(iii)

Qualified matching contributions described in paragraph (3)(D)(ii)(I).

(iv)

Earnings on any contributions described in clause (i), (ii), or (iii).

(B)

No requirement to take available loan

A distribution shall not be treated as failing to be made upon the hardship of an employee solely because the employee does not take any available loan under the plan.”.

.

(2)

Conforming amendment

Section 401(k)(2)(B)(i)(IV) is amended to read as follows:

(IV)

subject to the provisions of paragraph (14), upon hardship of the employee, or”.

.

(3)

Effective date

The amendments made by this subsection shall apply to plan years beginning after December 31, 2017.

V

Deductions and exclusions

11041.

Suspension of deduction for personal exemptions

(a)

In general

Subsection (d) of section 151 is amended—

(1)

by striking In the case of in paragraph (4) and inserting Except as provided in paragraph (5), in the case of, and

(2)

by adding at the end the following new paragraph:

(5)

Special rules for taxable years 2018 through 2025

In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026—

(A)

Exemption amount

The term exemption amount means zero.

(B)

References

For purposes of any other provision of this title, the reduction of the exemption amount to zero under subparagraph (A) shall not be taken into account in determining whether a deduction is allowed or allowable, or whether a taxpayer is entitled to a deduction, under this section.

.

(b)

Application to estates and trusts

Section 642(b)(2)(C) is amended by adding at the end the following new clause:

(iii)

Years when personal exemption amount is zero

(I)

In general

In the case of any taxable year in which the exemption amount under section 151(d) is zero, clause (i) shall be applied by substituting $4,150 for the exemption amount under section 151(d).

(II)

Inflation adjustment

In the case of any calendar year beginning after 2018, the $4,150 amount in subparagraph (A) shall be increased by an amount equal to—

(aa)

such dollar amount, multiplied by

(bb)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2017 for 2016 in subparagraph (A)(ii) thereof.

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

.

(c)

Exception for wage withholding rules

Section 3402(a) is amended by adding at the end the following new paragraph:

(3)

Years when personal exemption amount is zero

(A)

In general

In the case of any taxable year in which the exemption amount under section 151(d) is zero, paragraph (2) shall be applied by substituting $4,150 for the amount of one personal exemption provided in section 151(b).

(B)

Inflation adjustment

In the case of any calendar year beginning after 2018, the $4,150 amount in subparagraph (A) shall be increased by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2017 for 2016 in subparagraph (A)(ii) thereof.

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

.

(d)

Exception for determining property exempt from levy

Section 6334(d) is amended by adding at the end the following new paragraph:

(4)

Years when personal exemption amount is zero

(A)

In general

In the case of any taxable year in which the exemption amount under section 151(d) is zero, paragraph (2) shall not apply and for purposes of paragraph (1) the term exempt amount means an amount equal to—

(i)

the sum of the amount determined under subparagraph (B) and the standard deduction, divided by

(ii)

52.

(B)

Amount determined

For purposes of subparagraph (A), the amount determined under this subparagraph is $4,150 multiplied by the number of the taxpayer’s dependents for the taxable year in which the levy occurs.

(C)

Inflation adjustment

In the case of any taxable year beginning after 2018, the $4,150 amount in subparagraph (B) shall be increased by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2017 for 2016 in subparagraph (A)(ii) thereof.

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

Verified statement

Unless the taxpayer submits to the Secretary a written and properly verified statement specifying the facts necessary to determine the proper amount under subparagraph (A), subparagraph (A) shall be applied as if the taxpayer were a married individual filing a separate return with no dependents.

.

(e)

Persons required To make returns of income

Section 6012 is amended by adding at the end the following new subsection:

(f)

Special rule for taxable years 2018 through 2025

In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026, subsection (a)(1) shall not apply, and every individual who has gross income for the taxable year shall be required to make returns with respect to income taxes under subtitle A, except that a return shall not be required of—

(1)

an individual who is not married (determined by applying section 7703) and who has gross income for the taxable year which does not exceed the standard deduction applicable to such individual for such taxable year under section 63, or

(2)

an individual entitled to make a joint return if—

(A)

the gross income of such individual, when combined with the gross income of such individual’s spouse, for the taxable year does not exceed the standard deduction which would be applicable to the taxpayer for such taxable year under section 63 if such individual and such individual’s spouse made a joint return,

(B)

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

(C)

such individual’s spouse does not make a separate return, and

(D)

neither such individual nor such individual’s spouse is an individual described in section 63(c)(5) who has income (other than earned income) in excess of the amount in effect under section 63(c)(5)(A).

.

(f)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

11042.

Suspension of deduction for State and local, etc. taxes

(a)

In general

Subsection (b) of section 164 is amended by adding at the end the following new paragraph:

(6)

Suspension of individual deductions for taxable years 2018 through 2025

In the case of an individual and a taxable year beginning after December 31, 2017, and before January 1, 2026—

(A)

foreign real property taxes (other than taxes which are paid or accrued in carrying on a trade or business or an activity described in section 212) shall not be taken into account under subsection (a)(1),

(B)

the aggregate amount of taxes (other than taxes which are paid or accrued in carrying on a trade or business or an activity described in section 212) taken into account under subsection (a)(1) for any taxable year shall not exceed $10,000 ($5,000 in the case of a married individual filing a separate return),

(C)

subsection (a)(2) shall only apply to taxes which are paid or accrued in carrying on a trade or business or an activity described in section 212,

(D)

subsection (a)(3) shall not apply to State and local taxes, and

(E)

paragraph (5) shall not apply.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

11043.

Suspension of deduction for home equity interest

(a)

In general

Section 163(h)(3)(A)(ii) is amended by inserting in the case of taxable years beginning before January 1, 2018, or after December 31, 2025, before home equity indebtedness.

(b)

Effective date

The amendment made by this section shall apply to taxable years ending after December 31, 2017.

11044.

Modification of deduction for personal casualty losses

(a)

In general

Subsection (h) of section 165 is amended by adding at the end the following new paragraph:

(5)

Limitation for taxable years 2018 through 2025

In the case of an individual, any loss described in subsection (c)(3) which (but for this paragraph) would be deductible in a taxable year beginning after December 31, 2017, and before January 1, 2026, shall be allowed only to the extent it is attributable to a Federally declared disaster (as defined in subsection (i)(5)). The preceding sentence shall not apply to any deduction under section 172 which is carried to such a taxable year from a taxable year beginning before January 1, 2018.

.

(b)

Effective date

The amendment made by this section shall apply to losses incurred in taxable years beginning after December 31, 2017.

11045.

Suspension of miscellaneous itemized deductions

(a)

In general

Section 67 is amended by adding at the end the following new subsection:

(g)

Suspension for taxable years 2018 through 2025

Notwithstanding subsection (a), no miscellaneous itemized deduction shall be allowed for any taxable year beginning after December 31, 2017, and before January 1, 2026.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

11046.

Suspension of overall limitation on itemized deductions

(a)

In general

Section 68 is amended by adding at the end the following new subsection:

(f)

Section not To apply

This section shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

11047.

Modification of exclusion of gain from sale of principal residence

(a)

In general

Section 121 is amended by adding at the end the following new subsection:

(h)

Special rules for sales or exchanges in taxable years 2018 through 2025

(1)

In general

In applying this section with respect to sales or exchanges after December 31, 2017, and before January 1, 2026—

(A)

8-year shall be substituted for 5-year each place it appears in subsections (a), (b)(5)(C)(ii)(I), and (c)(1)(B)(i)(I) and paragraphs (7), (9), (10), and (12) of subsection (d),

(B)

5 years shall be substituted for 2 years each place it appears in subsections (a), (b)(3), (b)(4), (b)(5)(C)(ii)(III), and (c)(1)(B)(ii), and

(C)

5-year shall be substituted for 2-year in subsection (b)(3).

(2)

Exception for binding contracts

Paragraph (1) shall not apply to any sale or exchange with respect to which there was a written binding contract in effect before January 1, 2018, and at all times thereafter before the sale or exchange.

.

(b)

Effective date

The amendment made by this section shall apply to sales and exchanges after December 31, 2017.

11048.

Suspension of exclusion for qualified bicycle commuting reimbursement

(a)

In general

Section 132(f) is amended by adding at the end the following new paragraph:

(8)

Suspension of qualified bicycle commuting reimbursement exclusion

Paragraph (1)(D) shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

11049.

Suspension of exclusion for qualified moving expense reimbursement

(a)

In general

Section 132(g) is amended—

(1)

by striking For purposes of this section, the term and inserting “For purposes of this section—

(1)

In general

The term

, and

(2)

by adding at the end the following new paragraph:

(2)

Suspension for taxable years 2018 through 2025

Except in the case of a member of the Armed Forces of the United States on active duty who moves pursuant to a military order and incident to a permanent change of station, subsection (a)(6) shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

11050.

Suspension of deduction for moving expenses

(a)

In general

Section 217 is amended by adding at the end the following new subsection:

(k)

Suspension of deduction for taxable years 2018 through 2025

Except in the case of an individual to whom subsection (g) applies, this section shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

11051.

Limitation on wagering losses

(a)

In general

Section 165(d) is amended by adding at the end the following: For purposes of the preceding sentence, in the case of taxable years beginning after December 31, 2017, and before January 1, 2026, the term losses from wagering transactions includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction..

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

VI

Increase in estate and gift tax exemption

11061.

Increase in estate and gift tax exemption

(a)

In general

Section 2010(c)(3) is amended by adding at the end the following new subparagraph:

(C)

Increase in basic exclusion amount

In the case of estates of decedents dying or gifts made after December 31, 2017, and before January 1, 2026, subparagraph (A) shall be applied by substituting $10,000,000 for $5,000,000.

.

(b)

Conforming amendment

Subsection (g) of section 2001 is amended to read as follows:

(g)

Modifications to tax payable

(1)

Modifications to gift tax payable to reflect different tax rates

For purposes of applying subsection (b)(2) with respect to 1 or more gifts, the rates of tax under subsection (c) in effect at the decedent's death shall, in lieu of the rates of tax in effect at the time of such gifts, be used both to compute—

(A)

the tax imposed by chapter 12 with respect to such gifts, and

(B)

the credit allowed against such tax under section 2505, including in computing—

(i)

the applicable credit amount under section 2505(a)(1), and

(ii)

the sum of the amounts allowed as a credit for all preceding periods under section 2505(a)(2).

(2)

Modifications to estate tax payable to reflect different basic exclusion amounts

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out this section with respect to any difference between—

(A)

the basic exclusion amount under section 2010(c)(3) applicable at the time of the decedent's death, and

(B)

the basic exclusion amount under such section applicable with respect to any gifts made by the decedent.

.

(c)

Effective date

The amendments made by this section shall apply to estates of decedents dying and gifts made after December 31, 2017.

VII

Taxpayer rights and tax administration

11071.

Extension of time limit for contesting IRS levy

(a)

Extension of Time for Return of Property Subject to Levy

Subsection (b) of section 6343 is amended by striking 9 months and inserting 2 years.

(b)

Period of Limitation on Suits

Subsection (c) of section 6532 is amended—

(1)

by striking 9 months in paragraph (1) and inserting 2 years, and

(2)

by striking 9-month in paragraph (2) and inserting 2-year.

(c)

Effective Date

The amendments made by this section shall apply to—

(1)

levies made after the date of the enactment of this Act, and

(2)

levies made on or before such date if the 9-month period has not expired under section 6343(b) of the Internal Revenue Code of 1986 (without regard to this section) as of such date.

11072.

Modification of user fee requirements for installment agreements

(a)

In general

Section 6159 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

(f)

Installment agreement fees

(1)

Limitation on fee amount

The amount of any fee imposed on an installment agreement under this section may not exceed the amount of such fee as in effect on the date of the enactment of this subsection.

(2)

Waiver or reimbursement

In the case of any taxpayer with an adjusted gross income, as determined for the most recent year for which such information is available, which does not exceed 250 percent of the applicable poverty level (as determined by the Secretary)—

(A)

if the taxpayer has agreed to make payments under the installment agreement by electronic payment through a debit instrument, no fee shall be imposed on an installment agreement under this section, and

(B)

if the taxpayer is unable to make payments under the installment agreement by electronic payment through a debit instrument, the Secretary shall, upon completion of the installment agreement, pay the taxpayer an amount equal to any such fees imposed.

.

(b)

Effective date

The amendments made by this section shall apply to agreements entered into on or after the date which is 60 days after the date of the enactment of this Act.

11073.

Attorneys' fees relating to awards to whistleblowers

(a)

In general

Paragraph (21) of section 62(a) is amended to read as follows:

(21)

Attorneys' fees relating to awards to whistleblowers

(A)

In general

Any deduction allowable under this chapter for attorney fees and court costs paid by, or on behalf of, the taxpayer in connection with any award under—

(i)

section 7623(b), or

(ii)

any action brought under—

(I)

section 21F of the Securities Exchange Act of 1934 (15 U.S.C. 78u–6),

(II)

a State false claims act, including a State false claims act with qui tam provisions, or

(III)

section 23 of the Commodity Exchange Act (7 U.S.C. 26).

(B)

May not exceed award

Subparagraph (A) shall not apply to any deduction in excess of the amount includible in the taxpayer's gross income for the taxable year on account of such award.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

11074.

Clarification of whistleblower awards

(a)

Definition of proceeds

(1)

In general

Section 7623 is amended by adding at the end the following new subsection:

(c)

Proceeds

For purposes of this section, the term proceeds includes—

(1)

penalties, interest, additions to tax, and additional amounts provided under the internal revenue laws, and

(2)

any proceeds arising from laws for which the Internal Revenue Service is authorized to administer, enforce, or investigate, including—

(A)

criminal fines and civil forfeitures, and

(B)

violations of reporting requirements.

.

(2)

Conforming amendments

Paragraphs (1) and (2)(A) of section 7623(b) are each amended by striking collected proceeds (including penalties, interest, additions to tax, and additional amounts) resulting from the action and inserting proceeds collected as a result of the action.

(b)

Amount of proceeds determined without regard To availability

Paragraphs (1) and (2)(A) of section 7623(b) are each amended by inserting (determined without regard to whether such proceeds are available to the Secretary) after in response to such action.

(c)

Disputed amount threshold

Section 7623(b)(5)(B) is amended by striking tax, penalties, interest, additions to tax, and additional amounts and inserting proceeds.

(d)

Effective date

The amendments made by this section shall apply to information provided before, on, or after the date of the enactment of this Act with respect to which a final determination for an award has not been made before such date of enactment.

VIII

Individual mandate

11081.

Elimination of shared responsibility payment for individuals failing to maintain minimum essential coverage

(a)

In general

Section 5000A(c) is amended—

(1)

in paragraph (2)(B)(iii), by striking 2.5 percent and inserting Zero percent, and

(2)

in paragraph (3)—

(A)

by striking $695 in subparagraph (A) and inserting $0, and

(B)

by striking subparagraph (D).

(b)

Effective date

The amendments made by this section shall apply to months beginning after December 31, 2018.

B

Alternative minimum tax

12001.

Increased exemption for individuals

(a)

Increased exemption

Section 55(d) is amended by adding at the end the following new paragraph:

(5)

Special rule for taxable years beginning after 2017 and before 2026

(A)

In general

In the case of any taxable year beginning after December 31, 2017, and before January 1, 2026—

(i)

paragraph (1) shall be applied—

(I)

by substituting $109,400 for $78,750 in subparagraph (A), and

(II)

by substituting $70,300 for $50,600 in subparagraph (B), and

(ii)

paragraph (3) shall be applied—

(I)

by substituting $208,400 for $150,000 in subparagraph (A),

(II)

by substituting $156,300 for $112,500 in subparagraph (B), and

(III)

in the case of a taxpayer described in paragraph (1)(D), without regard to the substitution under subclause (I).

(B)

Inflation adjustment

(i)

In general

In the case of any taxable year beginning in a calendar year after 2018, the amounts described in clause (ii) shall each be increased by an amount equal to—

(I)

such dollar amount, multiplied by

(II)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2017 for calendar year 2016 in subparagraph (A)(ii) thereof.

(ii)

Amounts described

The amounts described in this clause are the $109,400 amount in subparagraph (A)(i)(I), the $70,300 amount in subparagraph (A)(i)(II), the $208,400 amount in subparagraph (A)(ii)(I), and the $156,300 amount in subparagraph (A)(ii)(II).

(iii)

Rounding

Any increased amount determined under clause (i) shall be rounded to the nearest multiple of $100.

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

C

Business-related provisions

I

Corporate provisions

13001.

20-percent corporate tax rate

(a)

In general

Subsection (b) of section 11 is amended to read as follows:

(b)

Amount of tax

The amount of the tax imposed by subsection (a) shall be 20 percent of taxable income.

.

(b)

Conforming amendments

(1)

The following sections are each amended by striking section 11(b)(1) and inserting section 11(b):

(A)

Section 280C(c)(3)(B)(ii)(II).

(B)

Paragraphs (2)(B) and (6)(A)(ii) of section 860E(e).

(C)

Section 7874(e)(1)(B).

(2)
(A)

Part I of subchapter P of chapter 1 is amended by striking section 1201 (and by striking the item relating to such section in the table of sections for such part).

(B)

Section 12 is amended by striking paragraphs (4) and (6), and by redesignating paragraph (5) as paragraph (4).

(C)

Section 453A(c)(3) is amended by striking or 1201 (whichever is appropriate).

(D)

Section 527(b) is amended—

(i)

by striking paragraph (2), and

(ii)

by striking all that precedes is hereby imposed and inserting:

(b)

Tax imposed

A tax

.

(E)

Sections 594(a) is amended by striking taxes imposed by section 11 or 1201(a) and inserting tax imposed by section 11.

(F)

Section 691(c)(4) is amended by striking 1201,.

(G)

Section 801(a) is amended—

(i)

by striking paragraph (2), and

(ii)

by striking all that precedes is hereby imposed and inserting:

(a)

Tax imposed

A tax

.

(H)

Section 831(e) is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.

(I)

Sections 832(c)(5) and 834(b)(1)(D) are each amended by striking sec. 1201 and following,.

(J)

Section 852(b)(3)(A) is amended by striking section 1201(a) and inserting section 11(b).

(K)

Section 857(b)(3) is amended—

(i)

by striking subparagraph (A) and redesignating subparagraphs (B) through (F) as subparagraphs (A) through (E), respectively,

(ii)

in subparagraph (C), as so redesignated—

(I)

by striking subparagraph (A)(ii) in clause (i) thereof and inserting paragraph (1),

(II)

by striking the tax imposed by subparagraph (A)(ii) in clauses (ii) and (iv) thereof and inserting the tax imposed by paragraph (1) on undistributed capital gain,

(iii)

in subparagraph (E), as so redesignated, by striking subparagraph (B) or (D) and inserting subparagraph (A) or (C), and

(iv)

by adding at the end the following new subparagraph:

(F)

Undistributed capital gain

For purposes of this paragraph, the term undistributed capital gain means the excess of the net capital gain over the deduction for dividends paid (as defined in section 561) determined with reference to capital gain dividends only.

.

(L)

Section 882(a)(1) is amended by striking , 55, or 1201(a) and inserting or 55.

(M)

Section 904(b) is amended—

(i)

by striking or 1201(a) in paragraph (2)(C),

(ii)

by striking paragraph (3)(D) and inserting the following:

(D)

Capital gain rate differential

There is a capital gain rate differential for any year if subsection (h) of section 1 applies to such taxable year.

, and

(iii)

by striking paragraph (3)(E) and inserting the following:

(E)

Rate differential portion

The rate differential portion of foreign source net capital gain, net capital gain, or the excess of net capital gain from sources within the United States over net capital gain, as the case may be, is the same proportion of such amount as—

(i)

the excess of—

(I)

the highest rate of tax set forth in subsection (a), (b), (c), (d), or (e) of section 1 (whichever applies), over

(II)

the alternative rate of tax determined under section 1(h), bears to

(ii)

that rate referred to in subclause (I).

.

(N)

Section 1374(b) is amended by striking paragraph (4).

(O)

Section 1381(b) is amended by striking taxes imposed by section 11 or 1201 and inserting tax imposed by section 11.

(P)

Sections 6425(c)(1)(A) and 6655(g)(1)(A)(i) are each amended by striking or 1201(a),.

(Q)

Section 7518(g)(6)(A) is amended by striking or 1201(a).

(3)
(A)

Section 1445(e)(1) is amended—

(i)

by striking 35 percent and inserting the highest rate of tax in effect for the taxable year under section 11(b), and

(ii)

by striking of the gain and inserting multiplied by the gain.

(B)

Section 1445(e)(2) is amended by striking 35 percent of the amount and inserting the highest rate of tax in effect for the taxable year under section 11(b) multiplied by the amount.

(C)

Section 1445(e)(6) is amended—

(i)

by striking 35 percent and inserting the highest rate of tax in effect for the taxable year under section 11(b), and

(ii)

by striking of the amount and inserting multiplied by the amount.

(D)

Section 1446(b)(2)(B) is amended by striking section 11(b)(1) and inserting section 11(b).

(4)

Section 852(b)(1) is amended by striking the last sentence.

(5)
(A)

Part I of subchapter B of chapter 5 is amended by striking section 1551 (and by striking the item relating to such section in the table of sections for such part).

(B)

Section 535(c)(5) is amended to read as follows:

(5)

Cross reference

For limitation on credit provided in paragraph (2) or (3) in the case of certain controlled corporations, see section 1561.

.

(6)
(A)

Section 1561(a) is amended—

(i)

by striking paragraph (1) and redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively,

(ii)

by striking amounts specified in paragraph (1) and the amount specified in paragraph (3) and inserting the amount specified in paragraph (2),

(iii)

by striking The amounts specified in paragraph (2) and inserting The amounts specified in paragraph (1),

(iv)

by striking the third sentence in the flush language, and

(v)

by striking under paragraph (3) and inserting under paragraph (2).

(B)

The first sentence of section 1561(b) is amended to read as follows: 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)(1) divided by the number of corporations which are component members of such group on the last day of such taxable year.

(7)

Section 7518(g)(6)(A) is amended—

(A)

by striking With respect to the portion and inserting In the case of a taxpayer other than a corporation, with respect to the portion, and

(B)

by striking (34 percent in the case of a corporation).

(c)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2018.

(2)

Withholding

The amendments made by subsection (b)(3) shall apply to distributions made after December 31, 2018.

(3)

Certain transfers

The amendments made by subsection (b)(6) shall apply to transfers made after December 31, 2018.

(d)

Normalization requirements

(1)

In general

A normalization method of accounting shall not be treated as being used with respect to any public utility property for purposes of section 167 or 168 of the Internal Revenue Code of 1986 if the taxpayer, in computing its cost of service for ratemaking purposes and reflecting operating results in its regulated books of account, reduces the excess tax reserve more rapidly or to a greater extent than such reserve would be reduced under the average rate assumption method.

(2)

Alternative Method for Certain Taxpayers

If, as of the first day of the taxable year that includes the date of enactment of this Act—

(A)

the taxpayer was required by a regulatory agency to compute depreciation for public utility property on the basis of an average life or composite rate method, and

(B)

the taxpayer’s books and underlying records did not contain the vintage account data necessary to apply the average rate assumption method,

the taxpayer will be treated as using a normalization method of accounting if, with respect to such jurisdiction, the taxpayer uses the alternative method for public utility property that is subject to the regulatory authority of that jurisdiction.
(3)

Definitions

For purposes of this subsection—

(A)

Excess tax reserve

The term excess tax reserve means the excess of—

(i)

the reserve for deferred taxes (as described in section 168(i)(9)(A)(ii) of the Internal Revenue Code of 1986) as determined under 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.

13002.

Reduction in dividend received deductions to reflect lower corporate income tax rates

(a)

Dividends received by corporations

(1)

In general

Section 243(a)(1) is amended by striking 70 percent and inserting 50 percent.

(2)

Dividends from 20-percent owned corporations

Section 243(c)(1) is amended—

(A)

by striking 80 percent and inserting 65 percent, and

(B)

by striking 70 percent and inserting 50 percent.

(3)

Conforming amendment

The heading for section 243(c) is amended by striking Retention of 80-percent dividend received deduction and inserting Increased percentage.

(b)

Dividends received from FSC

Section 245(c)(1)(B) is amended—

(1)

by striking 70 percent and inserting 50 percent, and

(2)

by striking 80 percent and inserting 65 percent.

(c)

Limitation on aggregate amount of deductions

Section 246(b)(3) is amended—

(1)

by striking 80 percent in subparagraph (A) and inserting 65 percent, and

(2)

by striking 70 percent in subparagraph (B) and inserting 50 percent.

(d)

Reduction in deduction where portfolio stock is debt-financed

Section 246A(a)(1) is amended—

(1)

by striking 70 percent and inserting 50 percent, and

(2)

by striking 80 percent and inserting 65 percent.

(e)

Income from sources within the United States

Section 861(a)(2) is amended—

(1)

by striking 100/70th and inserting 100/50th in subparagraph (B), and

(2)

in the flush sentence at the end—

(A)

by striking 100/80th and inserting 100/65th, and

(B)

by striking 100/70th and inserting 100/50th.

(f)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2018.

II

Small business reforms

13101.

Modifications of rules for expensing depreciable business assets

(a)

Increase in limitation

(1)

Dollar limitation

Section 179(b)(1) is amended by striking $500,000 and inserting $1,000,000.

(2)

Reduction in limitation

Section 179(b)(2) is amended by striking $2,000,000 and inserting $2,500,000.

(3)

Inflation adjustments

(A)

In general

Subparagraph (A) of section 179(b)(6), as amended by section 11002(d), is amended—

(i)

by striking 2015 and inserting 2018, and

(ii)

in clause (ii), by striking calendar year 2014 and inserting calendar year 2017.

(B)

Sport utility vehicles

Section 179(b)(6) is amended—

(i)

in subparagraph (A), by striking paragraphs (1) and (2) and inserting paragraphs (1), (2), and (5)(A), and

(ii)

in subparagraph (B), by inserting ($100 in the case of any increase in the amount under paragraph (5)(A)) after $10,000.

(b)

Section 179 property To include qualified real property

(1)

In general

Subparagraph (B) of section 179(d)(1) is amended to read as follows:

(B)

which is—

(i)

section 1245 property (as defined in section 1245(a)(3)), or

(ii)

at the election of the taxpayer, qualified real property (as defined in subsection (f)), and

.

(2)

Qualified real property defined

Subsection (f) of section 179 is amended to read as follows:

(f)

Qualified real property

For purposes of this section, the term qualified real property means—

(1)

any qualified improvement property described in section 168(e)(6), and

(2)

any of the following improvements to nonresidential real property placed in service after the date such property was first placed in service:

(A)

Roofs.

(B)

Heating, ventilation, and air-conditioning property.

(C)

Fire protection and alarm systems.

(D)

Security systems.

.

(c)

Repeal of exclusion for certain property

The last sentence of section 179(d)(1) is amended by inserting (other than paragraph (2) thereof) after section 50(b).

(d)

Effective date

The amendments made by this section shall apply to property placed in service in taxable years beginning after December 31, 2017.

13102.

Modifications of gross receipts test for use of cash method of accounting by corporations and partnerships

(a)

Modifications of gross receipts test

(1)

In general

So much of section 448(c) as precedes paragraph (2) is amended to read as follows:

(c)

Gross receipts test

(1)

In general

A corporation or partnership meets the gross receipts test of this subsection for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed the applicable dollar limit.

.

(2)

Applicable dollar limit

Subsection (c) of section 448 is amended by adding at the end the following new paragraph:

(4)

Applicable dollar limit

(A)

In general

The applicable dollar limit is $15,000,000.

(B)

Adjustment for inflation

In the case of any taxable year beginning after December 31, 2018, the $15,000,000 amount under subparagraph (A) shall be increased by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 2017 for calendar year 2016 in subparagraph (A)(ii) thereof.

If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.

.

(3)

Change in method of accounting

Paragraph (7) of section 448(d) is amended—

(A)

by striking In the case of and all that follows up to subparagraph (A) and inserting: If a taxpayer changes its method of accounting because the taxpayer is prohibited from using the cash receipts and disbursement method of accounting by reason of subsection (a) or is no longer prohibited from using such method by reason of such subsection—, and

(B)

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).

(4)

Conforming amendment

Paragraph (3) of section 448(b) is amended to read as follows:

(3)

Entities satisfying gross receipts test

Paragraphs (1) and (2) of subsection (a) shall not apply to any corporation or partnership for any taxable year if such entity meets the gross receipts test of subsection (c) for the taxable year.

.

(b)

Application of modifications To farming corporations

(1)

In general

Paragraph (1) of section 447(d) is amended to read as follows:

(1)

In general

A corporation meets the requirements of this subsection for any taxable year with respect to its gross receipts if the corporation meets the gross receipts test of section 448(c) for the taxable year.

.

(2)

Family corporations

Paragraph (2) of section 447(d) is amended—

(A)

by striking subparagraph (A) and inserting the following:

(A)

In general

In the case of a family corporation, in applying section 448(c) for purposes of paragraph (1)—

(i)

paragraph (1) of section 448(c) shall be applied by substituting the applicable family corporation limit for the applicable dollar limit, and

(ii)

the rules of subparagraph (B) shall apply in computing gross receipts.

,

(B)

in subparagraph (B)(i), by striking the last sentence of paragraph (1) and inserting paragraph (2) of section 448(c), and

(C)

by adding at the end the following new subparagraph:

(D)

Applicable family corporation limit

(i)

In general

The applicable family corporation limit is $25,000,000.

(ii)

Adjustment for inflation

In the case of any taxable year beginning after December 31, 2018, the $25,000,000 amount under clause (i) shall be increased by an amount equal to—

(I)

such dollar amount, multiplied by

(II)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 2017 for calendar year 2016 in subparagraph (A)(ii) thereof.

If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.

.

(3)

Exception for certain corporations

Subsection (c) of section 447 is amended by inserting for any taxable year after not being a corporation.

(4)

Change in method of accounting

Section 447(f) is amended—

(A)

by striking In the case of and all that follows up to paragraph (1) and inserting the following: If a taxpayer changes its method of accounting because the taxpayer is required to use an accrual method of accounting by reason of subsection (a) or is no longer required to use such method by reason of such subsection—, and

(B)

by striking paragraph (2) and inserting the following:

(2)

such change shall be treated as initiated by the taxpayer, and

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13103.

Clarification of inventory accounting rules for small businesses

(a)

Clarification of inventory rules

(1)

In general

Section 471 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:

(c)

Small business taxpayers not required To use inventories

(1)

In general

A qualified taxpayer shall not be required to use inventories under this section for a taxable year.

(2)

Treatment of taxpayers not using inventories

A qualified taxpayer who is not required under this subsection to use inventories with respect to any property for a taxable year beginning after December 31, 2017, may treat such property—

(A)

as a non-incidental material or supply, or

(B)

in a manner which conforms to the taxpayer's method for accounting for such property in—

(i)

an applicable financial statement (as defined in section 451(b)(3)), or

(ii)

in the case of a taxpayer that does not have an applicable financial statement, their books and records used for purposes of determining tax imposed by this title.

(3)

Qualified taxpayer

For purposes of this subsection, the term qualified taxpayer means, with respect to any taxable year, a taxpayer who meets the gross receipts test of section 448(c) for the taxable year (or, in the case of a sole proprietorship, who would meet such test if such proprietorship were a corporation). Such term shall not include a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3).

(4)

Coordination with section 481

If a taxpayer changes its method of accounting because the taxpayer is not required to use inventories by reason of paragraph (1) or is required to use inventories because such paragraph no longer applies to the taxpayer—

(A)

such change shall be treated as initiated by the taxpayer, and

(B)

such change shall be treated as made with the consent of the Secretary.

.

(2)

Conforming amendment

Subsection (c) of section 263A is amended by adding at the end the following new paragraph:

(8)

Exclusion from inventory rules

Nothing in this section shall require the use of inventories for any taxable year by a qualified taxpayer (within the meaning of section 471(c)(3)) who is not required to use inventories under section 471 for such taxable year.

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13104.

Modification of rules for uniform capitalization of certain expenses

(a)

In general

Section 263A(b) is amended by striking all that follows paragraph (1) and inserting the following new paragraphs:

(2)

Property acquired for resale

Real or personal property described in section 1221(a)(1) which is acquired by the taxpayer for resale.

(3)

Exception for small businesses

This section shall not apply to any taxpayer who meets the gross receipts test under section 448(c) for the taxable year (or, in the case of a sole proprietorship, who would meet such test if such proprietorship were a corporation), other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3).

(4)

Films, sound recordings, books, etc

For purposes of this subsection, the term tangible personal property shall include a film, sound recording, video tape, book, or similar property.

(5)

Coordination with section 481

If a taxpayer changes its method of accounting because this section does not apply to the taxpayer by reason of the exception under paragraph (3) or this section applies to the taxpayer because such exception no longer applies to the taxpayer—

(A)

such change shall be treated as initiated by the taxpayer, and

(B)

such change shall be treated as made with the consent of the Secretary.

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13105.

Increase in gross receipts test for construction contract exception to percentage of completion method

(a)

Increase

(1)

In general

Section 460(e)(1)(B) is amended—

(A)

in the matter preceding clause (i), by inserting (other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3)) after taxpayer, and

(B)

by striking clause (ii) and inserting the following:

(ii)

who meets the gross receipts test of section 448(c) for the taxable year in which such contract is entered into (or, in the case of a sole proprietorship, who would meet such test if such proprietorship were a corporation).

.

(2)

Conforming amendments

(A)

Section 460(e) is amended by striking paragraphs (2) and (3) and by redesignating paragraphs (4) through (6) as paragraphs (2) through (4), respectively.

(B)

The last sentence of section 56(a)(3) is amended by striking section 460(e)(6) and inserting section 460(e)(4).

(b)

Coordination with section 481

Section 460(e), as amended by subsection (a), is amended by adding at the end the following:

(5)

Coordination with section 481

If a taxpayer changes its method of accounting because subsections (a), (b), (c)(1), and (c)(2) do not apply by reason of the exception under paragraph (1)(B) or such subsections apply to the taxpayer because such exception no longer applies to the taxpayer—

(A)

such change shall be treated as initiated by the taxpayer,

(B)

such change shall be treated as made with the consent of the Secretary, and

(C)

such change shall be permitted only on a cut-off basis for all similarly classified contracts entered into on or after the year of change and no adjustments under section 481(a) shall be made.

.

(c)

Effective date

The amendment made by this section shall apply to contracts entered into after December 31, 2017, in taxable years ending after such date.

III

Cost recovery and accounting methods

A

Cost recovery

13201.

Temporary 100-percent expensing for certain business assets

(a)

Increased expensing

(1)

In general

Section 168(k) is amended—

(A)

in paragraph (1)(A), by striking 50 percent and inserting the applicable percentage, and

(B)

in paragraph (5)(A)(i), by striking 50 percent and inserting the applicable percentage.

(2)

Applicable percentage

Paragraph (6) of section 168(k) is amended to read as follows:

(6)

Applicable percentage

For purposes of this subsection—

(A)

In general

Except as otherwise provided in this paragraph, the term applicable percentage means—

(i)

in the case of property placed in service after September 27, 2017, and before January 1, 2023, 100 percent,

(ii)

in the case of property placed in service after December 31, 2022, and before January 1, 2024, 80 percent,

(iii)

in the case of property placed in service after December 31, 2023, and before January 1, 2025, 60 percent,

(iv)

in the case of property placed in service after December 31, 2024, and before January 1, 2026, 40 percent, and

(v)

in the case of property placed in service after December 31, 2025, and before January 1, 2027, 20 percent.

(B)

Rule for property with longer production periods

In the case of property described in paragraph (2)(B) or (C), the term applicable percentage means—

(i)

in the case of property placed in service after September 27, 2017, and before January 1, 2024, 100 percent,

(ii)

in the case of property placed in service after December 31, 2023, and before January 1, 2025, 80 percent,

(iii)

in the case of property placed in service after December 31, 2024, and before January 1, 2026, 60 percent,

(iv)

in the case of property placed in service after December 31, 2025, and before January 1, 2027, 40 percent, and

(v)

in the case of property placed in service after December 31, 2026, and before January 1, 2028, 20 percent.

(C)

Rule for plants bearing fruits and nuts

In the case of a specified plant described in paragraph (5), the term applicable percentage means—

(i)

in the case of a plant which is planted or grafted after September 27, 2017, and before January 1, 2023, 100 percent,

(ii)

in the case of a plant which is planted or grafted after December 31, 2022, and before January 1, 2024, 80 percent,

(iii)

in the case of a plant which is planted or grafted after December 31, 2023, and before January 1, 2025, 60 percent,

(iv)

in the case of a plant which is planted or grafted after December 31, 2024, and before January 1, 2026, 40 percent, and

(v)

in the case of a plant which is planted or grafted after December 31, 2025, and before January 1, 2027, 20 percent.

.

(3)

Conforming amendment

Paragraph (5) of section 168(k) is amended by striking subparagraph (F).

(b)

Extension

(1)

In general

Section 168(k) is amended—

(A)

in paragraph (2)—

(i)

in subparagraph (A)(iii), clauses (i)(III) and (ii) of subparagraph (B), and subparagraph (E)(i), by striking January 1, 2020 each place it appears and inserting January 1, 2027, and

(ii)

in subparagraph (B)—

(I)

in clause (i)(II), by striking January 1, 2021 and inserting January 1, 2028, and

(II)

in the heading of clause (ii), by striking pre-January 1, 2020 and inserting pre-January 1, 2027, and

(B)

in paragraph (5)(A), by striking January 1, 2020 and inserting January 1, 2027.

(2)

Conforming amendments

(A)

Clause (ii) of section 460(c)(6)(B) is amended by striking January 1, 2020 (January 1, 2021 and inserting January 1, 2027 (January 1, 2028.

(B)

The heading of section 168(k) is amended by striking acquired after December 31, 2007, and before January 1, 2020.

(c)

Exception for public utilities

Section 168(k) is amended by adding at the end the following new paragraph:

(8)

Exception for certain property

The term qualified property shall not include any property which is primarily used in a trade or business described in clause (iv) of section 163(j)(7)(A).

.

(d)

Special rule

Section 168(k), as amended by subsection (c), is amended by adding at the end the following new paragraph:

(9)

Special rule for property placed in service during certain periods

(A)

In general

In the case of qualified property placed in service by the taxpayer during the first taxable year ending after September 27, 2017, if the taxpayer elects to have this paragraph apply for such taxable year, paragraphs (1)(A) and (5)(A)(i) shall be applied by substituting ‘50 percent’ for ‘the applicable percentage’.

(B)

Form of election

Any election under this paragraph shall be made at such time and in such form and manner as the Secretary may prescribe.

.

(e)

Coordination with section 280F

Section 168(k)(2)(F) is amended by striking clause (iii).

(f)

Qualified film and television and live theatrical productions

(1)

In general

Clause (i) of section 168(k)(2)(A), as amended by section 13204, is amended—

(A)

in subclause (II), by striking or,

(B)

in subclause (III), by adding or after the comma, and

(C)

by adding at the end the following:

(IV)

which is a qualified film or television production (as defined in subsection (d) of section 181) for which a deduction would have been allowable under section 181 without regard to subsections (a)(2) and (g) of such section or this subsection, or

(V)

which is a qualified live theatrical production (as defined in subsection (e) of section 181) for which a deduction would have been allowable under section 181 without regard to subsections (a)(2) and (g) of such section or this subsection,

.

(2)

Production placed in service

Paragraph (2) of section 168(k) is amended by adding at the end the following:

(H)

Production placed in service

For purposes of subparagraph (A)—

(i)

a qualified film or television production shall be considered to be placed in service at the time of initial release or broadcast, and

(ii)

a qualified live theatrical production shall be considered to be placed in service at the time of the initial live staged performance.

.

(g)

Effective dates

The amendments made by this section shall apply to property placed in service, and specified plants planted or grafted after, after September 27, 2017, in taxable years ending after such date.

13202.

Modifications to depreciation limitations on luxury automobiles and personal use property

(a)

Luxury automobiles

(1)

In general

280F(a)(1)(A) is amended—

(A)

in clause (i), by striking $2,560 and inserting $10,000,

(B)

in clause (ii), by striking $4,100 and inserting $16,000,

(C)

in clause (iii), by striking $2,450 and inserting $9,600, and

(D)

in clause (iv), by striking $1,475 and inserting $5,760.

(2)

Conforming amendments

(A)

Clause (ii) of section 280F(a)(1)(B) is amended by striking $1,475 in the text and heading and inserting $5,760.

(B)

Paragraph (7) of section 280F(d) is amended—

(i)

in subparagraph (A), by striking 1988 and inserting 2018, and

(ii)

in subparagraph (B)(i)(II), by striking 1987 and inserting 2017.

(b)

Removal of computer equipment from listed property

(1)

In general

Section 280F(d)(4)(A) is amended—

(A)

by inserting and at the end of clause (iii),

(B)

by striking clause (iv), and

(C)

by redesignating clause (v) as clause (iv).

(2)

Conforming amendment

Section 280F(d)(4) is amended by striking subparagraph (B) and by redesignating subparagraph (C) as subparagraph (B).

(c)

Effective date

The amendments made by this section shall apply to property placed in service after December 31, 2017, in taxable years ending after such date.

13203.

Modifications of treatment of certain farm property

(a)

Treatment of certain farm property as 5-Year property

Clause (vii) of section 168(e)(3)(B) is amended by striking after December 31, 2008, and which is placed in service before January 1, 2010 and inserting after December 31, 2017.

(b)

Repeal of required use of 150-Percent declining balance method

Section 168(b)(2) is amended by striking subparagraph (B) and by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively.

(c)

Effective date

The amendments made by this section shall apply to property placed in service after December 31, 2017, in taxable years ending after such date.

13204.

Applicable recovery period for real property

(a)

Residential rental property and nonresidential real property

(1)

Reduction of recovery period

The table contained in section 168(c) is amended—

(A)

by striking 27.5 years and inserting 25 years, and

(B)

by striking 39 years and inserting 25 years.

(2)

Statutory recovery period

The table contained in section 467(e)(3)(A) is amended—

(A)

by inserting (other than residential rental property and nonresidential real property) after 15-year and 20-year property, and

(B)

by striking 19 years and inserting 25 years.

(3)

Conforming amendment

Clause (ii) of section 168(e)(2)(B) is amended by striking 27.5 years and inserting 25 years.

(b)

Improvements to real property

(1)

Classification of qualified improvement property as 10-year property

Subparagraph (D) of section 168(e)(3) is amended—

(A)

in clause (iii), by striking and,

(B)

in clause (iv), by striking the period and inserting , and, and

(C)

by adding at the end the following new clause:

(v)

any qualified improvement property described in subsection (e)(6).

.

(2)

Elimination of qualified leasehold improvement, qualified restaurant, and qualified retail improvement property

Subsection (e) of section 168 is amended—

(A)

in subparagraph (E) of paragraph (3)—

(i)

by striking clauses (iv), (v), and (ix),

(ii)

in clause (vii), by inserting and at the end,

(iii)

in clause (viii), by striking , and and inserting a period, and

(iv)

by redesignating clauses (vi), (vii), and (viii), as so amended, as clauses (iv), (v), and (vi), respectively, and

(B)

by striking paragraphs (6), (7), and (8).

(3)

Application of straight line method to qualified improvement property

Paragraph (3) of section 168(b) is amended—

(A)

by striking subparagraphs (G), (H), and (I), and

(B)

by inserting after subparagraph (F) the following new subparagraph:

(G)

Qualified improvement property described in subsection (e)(6).

.

(4)

Alternative Depreciation System

(A)

Electing real property trade or business

Subsection (g) of section 168 is amended—

(i)

in paragraph (1)—

(I)

in subparagraph (D), by striking and at the end,

(II)

in subparagraph (E), by inserting and at the end, and

(III)

by inserting after subparagraph (E) the following new subparagraph:

(F)

any property described in paragraph (8),

, and

(ii)

by adding at the end the following new paragraph:

(8)

Electing real property trade or business

The property described in this paragraph shall consist of any nonresidential real property, residential rental property, and qualified improvement property held by an electing real property trade or business (as defined in 163(j)(7)(B)).

.

(B)

Qualified improvement property

The table contained in subparagraph (B) of section 168(g)(3) is amended—

(i)

by inserting after the item relating to subparagraph (D)(ii) the following new item:

(D)(v)20

.

, and

(ii)

by striking the item relating to subparagraph (E)(iv) and all that follows through the item relating to subparagraph (E)(ix) and inserting the following:

(E)(iv)20
(E)(v)30
(E)(vi)35

.

(C)

Applicable recovery period for residential rental property

The table contained in subparagraph (C) of section 168(g)(2) is amended by striking clauses (iii) and (iv) and inserting the following:

(iii) Residential rental property30 years
(iv) Nonresidential real property40 years
(v) Any railroad grading or tunnel bore or water utility property50 years

.

(5)

Conforming amendments

(A)

Clause (i) of section 168(k)(2)(A) is amended—

(i)

in subclause (II), by inserting or after the comma,

(ii)

in subclause (III), by striking or at the end, and

(iii)

by striking subclause (IV).

(B)

Section 168 is amended—

(i)

in subsection (e), as amended by paragraph (2)(B), by adding at the end the following:

(6)

Qualified improvement property

(A)

In general

The term qualified improvement property means any improvement to an interior portion of a building which is nonresidential real property if such improvement is placed in service after the date such building was first placed in service.

(B)

Certain improvements not included

Such term shall not include any improvement for which the expenditure is attributable to—

(i)

the enlargement of the building,

(ii)

any elevator or escalator, or

(iii)

the internal structural framework of the building.

.

(ii)

in subsection (k), by striking paragraph (3).

(c)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to property placed in service after December 31, 2017.

(2)

Amendments related to electing real property trade or business

The amendments made by subsection (b)(4)(A) shall apply to taxable years beginning after December 31, 2017.

13205.

Use of alternative depreciation system for electing farming businesses

(a)

In general

Section 168(g)(1), as amended by section 13204, is amended by striking and at the end of subparagraph (E), by inserting and at the end of subparagraph (F), and by inserting after subparagraph (F) the following new subparagraph:

(G)

any property with a recovery period of 10 years or more which is held by an electing farming business (as defined in section 163(j)(7)(C)),

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13206.

Amortization of research and experimental expenditures

(a)

In general

Section 174 is amended to read as follows:

174.

Amortization of research and experimental expenditures

(a)

In general

In the case of a taxpayer’s specified research or experimental expenditures for any taxable year—

(1)

except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and

(2)

the taxpayer shall—

(A)

charge such expenditures to capital account, and

(B)

be allowed an amortization deduction of such expenditures ratably over the 5-year period (15-year period in the case of any specified research or experimental expenditures which are attributable to foreign research (within the meaning of section 41(d)(4)(F))) beginning with the midpoint of the taxable year in which such expenditures are paid or incurred.

(b)

Specified research or experimental expenditures

For purposes of this section, the term specified research or experimental expenditures means, with respect to any taxable year, research or experimental expenditures which are paid or incurred by the taxpayer during such taxable year in connection with the taxpayer’s trade or business.

(c)

Special rules

(1)

Land and other property

This section shall not apply to any expenditure for the acquisition or improvement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes of this section allowances under section 167, and allowances under section 611, shall be considered as expenditures.

(2)

Exploration expenditures

This section shall not apply to any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including oil and gas).

(3)

Software development

For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure.

(d)

Treatment upon disposition, retirement, or abandonment

If any property with respect to which specified research or experimental expenditures are paid or incurred is disposed, retired, or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section, no deduction shall be allowed with respect to such expenditures on account of such disposition, retirement, or abandonment and such amortization deduction shall continue with respect to such expenditures.

.

(b)

Change in method of accounting

The amendments made by subsection (a) shall be treated as a change in method of accounting for purposes of section 481 of the Internal Revenue Code of 1986 and—

(1)

such change shall be treated as initiated by the taxpayer,

(2)

such change shall be treated as made with the consent of the Secretary, and

(3)

such change shall be applied only on a cut-off basis for any research or experimental expenditures paid or incurred in taxable years beginning after December 31, 2025, and no adjustments under section 481(a) shall be made.

(c)

Clerical amendment

The table of sections for part VI of subchapter B of chapter 1 is amended by striking the item relating to section 174 and inserting the following new item:

Sec. 174. Amortization of research and experimental expenditures.

.

(d)

Conforming amendments

(1)

Section 41(d)(1)(A) is amended by striking expenses under section 174 and inserting specified research or experimental expenditures under section 174.

(2)

Subsection (c) of section 280C is amended—

(A)

by striking paragraph (1) and inserting the following:

(1)

In general

If—

(A)

the amount of the credit determined for the taxable year under section 41(a)(1), exceeds

(B)

the amount allowable as a deduction for such taxable year for qualified research expenses or basic research expenses,

the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess.

,

(B)

by striking paragraph (2),

(C)

by redesignating paragraphs (3) (as amended by this Act) and (4) as paragraphs (2) and (3), respectively, and

(D)

in paragraph (2), as redesignated by subparagraph (C), by striking paragraphs (1) and (2) and inserting paragraph (1).

(e)

Effective date

The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2025.

13207.

Expensing of certain costs of replanting citrus plants lost by reason of casualty

(a)

In general

Section 263A(d)(2) is amended by adding at the end the following new subparagraph:

(C)

Special temporary rule for citrus plants lost by reason of casualty

(i)

In general

In the case of the replanting of citrus plants, subparagraph (A) shall apply to amounts paid or incurred by a person (other than the taxpayer described in subparagraph (A)) if—

(I)

the taxpayer described in subparagraph (A) has an equity interest of not less than 50 percent in the replanted citrus plants at all times during the taxable year in which such amounts were paid or incurred and such other person holds any part of the remaining equity interest, or

(II)

such other person acquired the entirety of such taxpayer’s equity interest in the land on which the lost or damaged citrus plants were located at the time of such loss or damage, and the replanting is on such land.

(ii)

Termination

Clause (i) shall not apply to any cost paid or incurred after the date which is 10 years after the date of the enactment of the Tax Cuts and Jobs Act.

.

(b)

Effective date

The amendment made by this section shall apply to costs paid or incurred after the date of the enactment of this Act.

B

Accounting methods

13221.

Certain special rules for taxable year of inclusion

(a)

Inclusion not later than for financial accounting purposes

Section 451 is amended by redesignating subsections (b) through (i) as subsections (c) through (j), respectively, and by inserting after subsection (a) the following new subsection:

(b)

Inclusion not later than for financial accounting purposes

(1)

Income taken into account in financial statement

(A)

In general

In the case of a taxpayer the taxable income of which is computed under an accrual method of accounting, the all events test with respect to any item of gross income (or portion thereof) shall not be treated as met any later than when such item (or portion thereof) is taken into account as revenue in—

(i)

an applicable financial statement of the taxpayer, or

(ii)

such other financial statement as the Secretary may specify for purposes of this subsection.

(B)

Exception

This paragraph shall not apply to—

(i)

a taxpayer which does not have a financial statement described in clause (i) or (ii) of subparagraph (A) for a taxable year, or

(ii)

any item of gross income in connection with a mortgage servicing contract.

(C)

All events test

For purposes of this section, the all events test is met with respect to any item of gross income if all the events have occurred which fix the right to receive such income and the amount of such income can be determined with reasonable accuracy.

(2)

Coordination with special methods of accounting

Paragraph (1) shall not apply with respect to any item of gross income for which the taxpayer uses a special method of accounting provided under any other provision of this chapter, other than any provision of part V of subchapter P (except as provided in clause (ii) of paragraph (1)(B)).

(3)

Applicable financial statement

For purposes of this subsection, the term applicable financial statement means—

(A)

a financial statement which is certified as being prepared in accordance with generally accepted accounting principles and which is—

(i)

a 10–K (or successor form), or annual statement to shareholders, required to be filed by the taxpayer with the United States Securities and Exchange Commission,

(ii)

an audited financial statement of the taxpayer which is used for—

(I)

credit purposes,

(II)

reporting to shareholders, partners, or other proprietors, or to beneficiaries, or

(III)

any other substantial nontax purpose,

but only if there is no statement of the taxpayer described in clause (i), or
(iii)

filed by the taxpayer with any other Federal agency for purposes other than Federal tax purposes, but only if there is no statement of the taxpayer described in clause (i) or (ii),

(B)

a financial statement which is made on the basis of international financial reporting standards and is filed by the taxpayer with an agency of a foreign government which is equivalent to the United States Securities and Exchange Commission and which has reporting standards not less stringent than the standards required by such Commission, but only if there is no statement of the taxpayer described in subparagraph (A), or

(C)

a financial statement filed by the taxpayer with any other regulatory or governmental body specified by the Secretary, but only if there is no statement of the taxpayer described in subparagraph (A) or (B).

(4)

Allocation of transaction price

For purposes of this subsection, in the case of a contract which contains multiple performance obligations, the allocation of the transaction price to each performance obligation shall be equal to the amount allocated to each performance obligation for purposes of including such item in revenue in the applicable financial statement of the taxpayer.

(5)

Group of entities

For purposes of paragraph (1), if the financial results of a taxpayer are reported on the applicable financial statement (as defined in paragraph (3)) for a group of entities, such statement may be treated as the applicable financial statement of the taxpayer.

.

(b)

Treatment of advance payments

Section 451, as amended by subsection (a), is amended by redesignating subsections (c) through (j) as subsections (d) through (k), respectively, and by inserting after subsection (b) the following new subsection:

(c)

Treatment of advance payments

(1)

In general

A taxpayer which computes taxable income under the accrual method of accounting, and receives any advance payment during the taxable year, shall—

(A)

except as provided in subparagraph (B), include such advance payment in gross income for such taxable year, or

(B)

if the taxpayer elects the application of this subparagraph with respect to the category of advance payments to which such advance payment belongs, the taxpayer shall—

(i)

to the extent that any portion of such advance payment is required under subsection (b) to be included in gross income in the taxable year in which such payment is received, so include such portion, and

(ii)

include the remaining portion of such advance payment in gross income in the taxable year following the taxable year in which such payment is received.

(2)

Election

(A)

In general

Except as otherwise provided in this paragraph, the election under paragraph (1)(B) shall be made at such time, in such form and manner, and with respect to such categories of advance payments, as the Secretary may provide.

(B)

Period to which election applies

An election under paragraph (1)(B) shall be effective for the taxable year with respect to which it is first made and for all subsequent taxable years, unless the taxpayer secures the consent of the Secretary to revoke such election. For purposes of this title, the computation of taxable income under an election made under paragraph (1)(B) shall be treated as a method of accounting.

(3)

Taxpayers ceasing to exist

Except as otherwise provided by the Secretary, the election under paragraph (1)(B) shall not apply with respect to advance payments received by the taxpayer during a taxable year if such taxpayer ceases to exist during (or with the close of) such taxable year.

(4)

Advance payment

For purposes of this subsection—

(A)

In general

The term advance payment means any payment—

(i)

the full inclusion of which in the gross income of the taxpayer for the taxable year of receipt is a permissible method of accounting under this section (determined without regard to this subsection),

(ii)

any portion of which is included in revenue by the taxpayer in a financial statement described in clause (i) or (ii) of subsection (b)(1)(A) for a subsequent taxable year, and

(iii)

which is for goods, services, or such other items as may be identified by the Secretary for purposes of this clause.

(B)

Exclusions

Except as otherwise provided by the Secretary, such term shall not include—

(i)

rent,

(ii)

insurance premiums governed by subchapter L,

(iii)

payments with respect to financial instruments,

(iv)

payments with respect to warranty or guarantee contracts under which a third party is the primary obligor,

(v)

payments subject to section 871(a), 881, 1441, or 1442,

(vi)

payments in property to which section 83 applies, and

(vii)

any other payment identified by the Secretary for purposes of this subparagraph.

(C)

Receipt

For purposes of this subsection, an item of gross income is received by the taxpayer if it is actually or constructively received, or if it is due and payable to the taxpayer.

(D)

Allocation of transaction price

For purposes of this subsection, rules similar to subsection (b)(4) shall apply.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

(d)

Coordination with section 481

(1)

In general

In the case of any qualified change in method of accounting for the taxpayer’s first taxable year beginning after December 31, 2017—

(A)

such change shall be treated as initiated by the taxpayer, and

(B)

such change shall be treated as made with the consent of the Secretary of the Treasury.

(2)

Qualified change in method of accounting

For purposes of this subsection, the term qualified change in method of accounting means any change in method of accounting which—

(A)

is required by the amendments made by this section, or

(B)

was prohibited under the Internal Revenue Code of 1986 prior to such amendments and is permitted under such Code after such amendments.

(e)

Special rules for original issue discount

Notwithstanding subsection (c), in the case of income from a debt instrument having original issue discount—

(1)

the amendments made by this section shall apply to taxable years beginning after December 31, 2018, and

(2)

the period for taking into account any adjustments under section 481 by reason of a qualified change in method of accounting (as defined in subsection (d)) shall be 6 years.

IV

Business-related exclusions and deductions

13301.

Limitation on deduction for interest

(a)

In general

Section 163(j) is amended to read as follows:

(j)

Limitation on business interest

(1)

In general

The amount allowed as a deduction under this chapter for any taxable year for business interest shall not exceed the sum of—

(A)

the business interest income of such taxpayer for such taxable year, plus

(B)

30 percent of the adjusted taxable income of such taxpayer for such taxable year.

The amount determined under subparagraph (B) shall not be less than zero.
(2)

Carryforward of disallowed business interest

The amount of any business interest not allowed as a deduction for any taxable year by reason of paragraph (1) shall be treated as business interest paid or accrued in the succeeding taxable year.

(3)

Exemption for certain small businesses

In the case of any taxpayer (other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3)) which meets the gross receipts test of section 448(c) for any taxable year, paragraph (1) shall not apply to such taxpayer for such taxable year. In the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if such taxpayer were a corporation or partnership.

(4)

Application to partnerships, etc

(A)

In general

In the case of any partnership—

(i)

this subsection shall be applied at the partnership level and any deduction for business interest shall be taken into account in determining the non-separately stated taxable income or loss of the partnership, and

(ii)

the adjusted taxable income of each partner of such partnership—

(I)

shall be determined without regard to such partner’s distributive share of any items of income, gain, deduction, or loss of such partnership, and

(II)

shall be increased by such partner’s distributive share of such partnership’s excess taxable income.

For purposes of clause (ii)(II), a partner's distributive share of partnership excess taxable income shall be determined in the same manner as the partner's distributive share of nonseparately stated taxable income or loss of the partnership.
(B)

Special rules for carryforwards

(i)

In general

The amount of any business interest not allowed as a deduction to a partnership for any taxable year by reason of paragraph (1) for any taxable year—

(I)

shall not be treated under paragraph (2) as business interest paid or accrued by the partnership in the succeeding taxable year, and

(II)

shall, subject to clause (ii), be treated as excess business interest which is allocated to each partner in the same manner as the non-separately stated taxable income or loss of the partnership.

(ii)

Treatment of excess business interest allocated to partners

If a partner is allocated any excess business interest from a partnership under clause (i) for any taxable year—

(I)

such excess business interest shall be treated as business interest paid or accrued by the partner in the next succeeding taxable year in which the partner is allocated excess taxable income from such partnership, but only to the extent of such excess taxable income, and

(II)

any portion of such excess business interest remaining after the application of subclause (I) shall, subject to the limitations of subclause (I), be treated as business interest paid or accrued in succeeding taxable years.

For purposes of applying this paragraph, excess taxable income allocated to a partner from a partnership for any taxable year shall not be taken into account under paragraph (1)(A) with respect to any business interest other than excess business interest from the partnership until all such excess business interest for such taxable year and all preceding taxable years has been treated as paid or accrued under clause (ii).
(iii)

Basis adjustments

(I)

In general

The adjusted basis of a partner in a partnership interest shall be reduced (but not below zero) by the amount of excess business interest allocated to the partner under clause (i)(II).

(II)

Special rule for dispositions

If a partner disposes of a partnership interest, the adjusted basis of the partner in the partnership interest shall be increased immediately before the disposition by the amount of the excess (if any) of the amount of the basis reduction under subclause (I) over the portion of any excess business interest allocated to the partner under clause (i)(II) which has previously been treated under clause (ii) as business interest paid or accrued by the partner. The preceding sentence shall also apply to transfers of the partnership interest (including by reason of death) in a transaction in which gain is not recognized in whole or in part. No deduction shall be allowed to the transferor or transferee under this chapter for any excess business interest resulting in a basis increase under this subclause.

(C)

Excess taxable income

The term excess taxable income means, with respect to any partnership, the amount which bears the same ratio to the partnership’s adjusted taxable income as—

(i)

the excess (if any) of—

(I)

the amount determined for the partnership under paragraph (1)(B), over

(II)

the amount (if any) by which the business interest of the partnership exceeds the business interest income of the partnership, bears to

(ii)

the amount determined for the partnership under paragraph (1)(B).

(D)

Application to S corporations

Rules similar to the rules of subparagraphs (A) and (C) shall apply with respect to any S corporation and its shareholders.

(5)

Business interest

For purposes of this subsection, the term business interest means any interest paid or accrued on indebtedness properly allocable to a trade or business. Such term shall not include investment interest (within the meaning of subsection (d)).

(6)

Business interest income

For purposes of this subsection, the term business interest income means the amount of interest includible in the gross income of the taxpayer for the taxable year which is properly allocable to a trade or business. Such term shall not include investment income (within the meaning of subsection (d)).

(7)

Trade or business

For purposes of this subsection—

(A)

In general

The term trade or business shall not include—

(i)

the trade or business of performing services as an employee,

(ii)

any electing real property trade or business,

(iii)

any electing farming business, or

(iv)

the trade or business of the furnishing or sale of—

(I)

electrical energy, water, or sewage disposal services,

(II)

gas or steam through a local distribution system, or

(III)

transportation of gas or steam by pipeline,

if the rates for such furnishing or sale, as the case may be, have been established or approved by a State or political subdivision thereof, by any agency or instrumentality of the United States, by a public service or public utility commission or other similar body of any State or political subdivision thereof, or by the governing or ratemaking body of an electric cooperative.
(B)

Electing real property trade or business

For purposes of this paragraph, the term electing real property trade or business means any trade or business which is described in section 469(c)(7)(C) and which makes an election under this subparagraph. Any such election shall be made at such time and in such manner as the Secretary shall prescribe, and, once made, shall be irrevocable.

(C)

Electing farming business

For purposes of this paragraph, the term electing farming business means—

(i)

a farming business (as defined in section 263A(e)(4)) which makes an election under this subparagraph, or

(ii)

any trade or business of a specified agricultural or horticultural cooperative (as defined in section 199A(g)(2)) with respect to which the cooperative makes an election under this subparagraph.

Any such election shall be made at such time and in such manner as the Secretary shall prescribe, and, once made, shall be irrevocable.
(8)

Adjusted taxable income

For purposes of this subsection, the term adjusted taxable income means the taxable income of the taxpayer—

(A)

computed without regard to—

(i)

any item of income, gain, deduction, or loss which is not properly allocable to a trade or business,

(ii)

any business interest or business interest income,

(iii)

the amount of any net operating loss deduction under section 172, and

(iv)

the amount of any deduction allowed under section 199 or 199A, and

(B)

computed with such other adjustments as provided by the Secretary.

(9)

Cross references

(A)

For requirement that an electing real property trade or business use the alternative depreciation system, see section 168(g)(1)(F).

(B)

For requirement that an electing farming business use the alternative depreciation system, see section 168(g)(1)(G).

.

(b)

Treatment of carryforward of disallowed business interest in certain corporate acquisitions

(1)

In general

Section 381(c) is amended by inserting after paragraph (19) the following new paragraph:

(20)

Carryforward of disallowed business interest

The carryover of disallowed business interest described in section 163(j)(2) to taxable years ending after the date of distribution or transfer.

.

(2)

Application of limitation

Section 382(d) is amended by adding at the end the following new paragraph:

(3)

Application to carryforward of disallowed interest

The term pre-change loss shall include any carryover of disallowed interest described in section 163(n) under rules similar to the rules of paragraph (1).

.

(3)

Conforming amendment

Section 382(k)(1) is amended by inserting after the first sentence the following: Such term shall include any corporation entitled to use a carryforward of disallowed interest described in section 381(c)(20)..

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13302.

Modification of net operating loss deduction

(a)

Limitation on deduction

(1)

In general

Section 172(a) is amended to read as follows:

(a)

Deduction allowed

There shall be allowed as a deduction for the taxable year an amount equal to the lesser of—

(1)

the aggregate of the net operating loss carryovers to such year, plus the net operating loss carrybacks to such year, or

(2)

90 percent (80 percent in the case of taxable years beginning after December 31, 2022) of taxable income computed without regard to the deduction allowable under this section.

For purposes of this subtitle, the term net operating loss deduction means the deduction allowed by this subsection.

.

(2)

Coordination of limitation with carrybacks and carryovers

Section 172(b)(2) is amended by striking shall be computed— and all that follows and inserting

shall—

(A)

be computed with the modifications specified in subsection (d) other than paragraphs (1), (4), and (5) thereof, and by determining the amount of the net operating loss deduction without regard to the net operating loss for the loss year or for any taxable year thereafter,

(B)

not be considered to be less than zero, and

(C)

not exceed the amount determined under subsection (a)(2) for such prior taxable year.

.

(3)

Conforming amendment

Section 172(d)(6) is amended by striking and at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ; and, and by adding at the end the following new subparagraph:

(C)

subsection (a)(2) shall be applied by substituting real estate investment trust taxable income (as defined in section 857(b)(2) but without regard to the deduction for dividends paid (as defined in section 561)) for taxable income.

.

(b)

Repeal of net operating loss carryback; indefinite carryforward

(1)

In general

Section 172(b)(1)(A) is amended—

(A)

by striking shall be a net operating loss carryback to each of the 2 taxable years in clause (i) and inserting except as otherwise provided in this paragraph, shall not be a net operating loss carryback to any taxable year, and

(B)

by striking to each of the 20 taxable years in clause (ii) and inserting to each taxable year.

(2)

Conforming amendment

Section 172(b)(1) is amended by striking subparagraphs (B) through (F).

(c)

Treatment of farming losses

(1)

Allowance of carrybacks

Section 172(b)(1), as amended by subsection (b)(2), is amended by adding at the end the following new subparagraph:

(B)

Farming losses

(i)

In general

In the case of any portion of a net operating loss for the taxable year which is a farming loss with respect to the taxpayer, such loss shall be a net operating loss carryback to each of the 2 taxable years preceding the taxable year of such loss.

(ii)

Farming loss

For purposes of this section, the term farming loss means the lesser of—

(I)

the amount which would be the net operating loss for the taxable year if only income and deductions attributable to farming businesses (as defined in section 263A(e)(4)) are taken into account, or

(II)

the amount of the net operating loss for such taxable year.

(iii)

Coordination with paragraph (2)

For purposes of applying paragraph (2), a farming loss for any taxable year shall be treated as a separate net operating loss for such taxable year to be taken into account after the remaining portion of the net operating loss for such taxable year.

(iv)

Election

Any taxpayer entitled to a 2-year carryback under clause (i) from any loss year may elect not to have such clause apply to such loss year. Such election shall be made in such manner as prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the net operating loss. Such election, once made for any taxable year, shall be irrevocable for such taxable year.

.

(2)

Conforming amendments

(A)

Section 172 is amended by striking subsections (f), (g), and (h), and by redesignating subsection (i) as subsection (f).

(B)

Section 537(b)(4) is amended by inserting (as in effect before the date of enactment of the Tax Cuts and Jobs Act) after as defined in section 172(f).

(d)

Treatment of certain insurance losses

(1)

Treatment of carryforwards and carrybacks

Section 172(b)(1), as amended by subsections (b)(2) and (c)(1), is amended by adding at the end the following new subparagraph:

(C)

Insurance companies

In the case of an insurance company (as defined in section 816(a)) other than a life insurance company, the net operating loss for any taxable year—

(i)

shall be a net operating loss carryback to each of the 2 taxable years preceding the taxable year of such loss, and

(ii)

shall be a net operating loss carryover to each of the 20 taxable years following the taxable year of the loss.

.

(2)

Exemption from limitation

Section 172, as amended by subsection (c)(2)(A), is amended by redesignating subsection (f) as subsection (g) and inserting after subsection (e) the following new subsection:

(f)

Special rule for insurance companies

In the case of an insurance company (as defined in section 816(a)) other than a life insurance company—

(1)

the amount of the deduction allowed under subsection (a) shall be the aggregate of the net operating loss carryovers to such year, plus the net operating loss carrybacks to such year, and

(2)

subparagraph (C) of subsection (b)(2) shall not apply.

.

(e)

Effective date

(1)

Net operating loss limitation

The amendments made by subsections (a) and (d)(2) shall apply to losses arising in taxable years beginning after December 31, 2017.

(2)

Carryforwards and carrybacks

The amendments made by subsections (b), (c), and (d)(1) shall apply to net operating losses arising in taxable years ending after December 31, 2017.

13303.

Like-kind exchanges of real property

(a)

In general

Section 1031(a)(1) is amended by striking property each place it appears and inserting real property.

(b)

Conforming amendments

(1)
(A)

Paragraph (2) of section 1031(a) is amended to read as follows:

(2)

Exception for real property held for sale

This subsection shall not apply to any exchange of real property held primarily for sale.

.

(B)

Section 1031 is amended by striking subsection (i).

(2)

Section 1031 is amended by striking subsection (e).

(3)

Section 1031, as amended by paragraph (2), is amended by inserting after subsection (d) the following new subsection:

(e)

Application to certain partnerships

For purposes of this section, an interest in a partnership which has in effect a valid election under section 761(a) to be excluded from the application of all of subchapter K shall be treated as an interest in each of the assets of such partnership and not as an interest in a partnership.

.

(4)

Section 1031(h) is amended to read as follows:

(h)

Special rules for foreign real property

Real property located in the United States and real property located outside the United States are not property of a like kind.

.

(5)

The heading of section 1031 is amended by striking property and inserting real property.

(6)

The table of sections for part III of subchapter O of chapter 1 is amended by striking the item relating to section 1031 and inserting the following new item:

Sec. 1031. Exchange of real property held for productive use or investment.

.

(c)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to exchanges completed after December 31, 2017.

(2)

Transition rule

The amendments made by this section shall not apply to any exchange if—

(A)

the property disposed of by the taxpayer in the exchange is disposed of on or before December 31 2017, or

(B)

the property received by the taxpayer in the exchange is received on or before December 31, 2017.

13304.

Limitation on deduction by employers of expenses for fringe benefits

(a)

No deduction allowed for entertainment expenses

(1)

In general

Section 274(a) is amended—

(A)

in paragraph (1)(A), by striking unless and all that follows through trade or business,,

(B)

by striking the flush sentence at the end of paragraph (1), and

(C)

by striking paragraph (2)(C).

(2)

Conforming amendments

(A)

Section 274(d) is amended—

(i)

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

(ii)

in the flush text following paragraph (3) (as so redesignated)—

(I)

by striking , entertainment, amusement, recreation, or use of the facility or property, in item (B), and

(II)

by striking (D) the business relationship to the taxpayer of persons entertained, using the facility or property, or receiving the gift and inserting (D) the business relationship to the taxpayer of the person receiving the benefit,

(B)

Section 274 is amended by striking subsection (l).

(C)

Section 274(n) is amended by striking and entertainment in the heading.

(D)

Section 274(n)(1) is amended to read as follows:

(1)

In general

The amount allowable as a deduction under this chapter for any expense for food or beverages shall not exceed 50 percent of the amount of such expense which would (but for this paragraph) be allowable as a deduction under this chapter.

.

(E)

Section 274(n)(2) is amended—

(i)

in subparagraph (B), by striking in the case of an expense for food or beverages,,

(ii)

by striking subparagraph (C) and redesignating subparagraphs (D) and (E) as subparagraphs (C) and (D), respectively,

(iii)

by striking of subparagraph (E) the last sentence and inserting of subparagraph (D), and

(iv)

by striking in subparagraph (D) in the last sentence and inserting in subparagraph (C).

(F)

Clause (iv) of section 7701(b)(5)(A) is amended to read as follows:

(iv)

a professional athlete who is temporarily in the United States to compete in a sports event—

(I)

which is organized for the primary purpose of benefiting an organization which is described in section 501(c)(3) and exempt from tax under section 501(a),

(II)

all of the net proceeds of which are contributed to such organization, and,

(III)

which utilizes volunteers for substantially all of the work performed in carrying out such event.

.

(b)

Only 50 percent of expenses for meals provided on or near business premises allowed as deduction

Paragraph (2) of section 274(n), as amended by subsection (a), is amended—

(1)

by striking subparagraph (B),

(2)

by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively,

(3)

by striking of subparagraph (D) in the last sentence and inserting of subparagraph (C), and

(4)

by striking in subparagraph (C) in the last sentence and inserting in subparagraph (B).

(c)

Treatment of transportation benefits

Section 274, as amended by subsection (a), is amended—

(1)

in subsection (a)—

(A)

in the heading, by striking or recreation and inserting recreation, or qualified transportation fringes, and

(B)

by adding at the end the following new paragraph:

(4)

Qualified transportation fringes

No deduction shall be allowed under this chapter for the expense of any qualified transportation fringe (as defined in section 132(f)) provided to an employee of the taxpayer.

, and

(2)

by inserting after subsection (k) the following new subsection:

(l)

Transportation and commuting benefits

No deduction shall be allowed under this chapter for any expense incurred for providing any transportation, or any payment or reimbursement, to an employee of the taxpayer in connection with travel between the employee's residence and place of employment, except as necessary for ensuring the safety of the employee.

.

(d)

Elimination of deduction for meals provided at convenience of employer

Section 274, as amended by subsection (c), is amended—

(1)

by redesignating subsection (o) as subsection (p), and

(2)

by inserting after subsection (n) the following new subsection:

(o)

Meals provided at convenience of employer

No deduction shall be allowed under this chapter for—

(1)

any expense for the operation of a facility described in section 132(e)(2), and any expense for food or beverages, including under section 132(e)(1), associated with such facility, or

(2)

any expense for meals described in section 119(a).

.

(e)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to amounts incurred or paid after December 31, 2017.

(2)

Effective date for elimination of deduction for meals provided at convenience of employer

The amendments made by subsection (d) shall apply to amounts incurred or paid after December 31, 2025.

13305.

Repeal of deduction for income attributable to domestic production activities

(a)

Repeal

(1)

Taxpayers other than corporations

Section 199 is amended by adding at the end the following new subsection:

(e)

Partial termination for taxpayers other than corporations

In the case of a taxpayer other than a C corporation, this section shall not apply to any taxable year beginning after December 31, 2017.

.

(2)

Certain special rules for cooperatives

Section 199(d)(3) is amended by adding at the end the following new subparagraph:

(G)

Partial termination

Subparagraphs (A) and (B) shall not apply to any taxable year beginning after December 31, 2017.

.

(3)

Total repeal

Part VI of subchapter B of chapter 1, as amended by paragraphs (1) and (2), is amended by striking section 199 (and by striking the item relating to such section in the table of sections for such part).

(b)

Conforming amendments

(1)

Sections 74(d)(2)(B), 86(b)(2)(A), 135(c)(4)(A), 137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C), 222(b)(2)(C), 246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking 199,.

(2)

Section 170(b)(2)(D), as amended by section 11011, is amended by striking clause (iv) and by redesignating clauses (v) and (vi) as redesignating clauses (iv) as clause (v), respectively.

(3)

Section 172(d) is amended by striking paragraph (7).

(4)

Section 613(a) is amended by striking and without the deduction under section 199.

(5)

Section 613A(d)(1) is amended by striking subparagraph (B) and by redesignating subparagraphs (C), (D), and (E) as subparagraphs (B), (C), and (D).

(c)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2018.

(2)

Earlier termination for certain taxpayers

The amendment made by paragraphs (1) and (2) of subsection (a) shall apply to taxable years beginning after December 31, 2017.

13306.

Denial of deduction for certain fines, penalties, and other amounts

(a)

Denial of deduction

(1)

In general

Subsection (f) of section 162 is amended to read as follows:

(f)

Fines, Penalties, and Other Amounts

(1)

In general

Except as provided in the following paragraphs of this subsection, no deduction otherwise allowable shall be allowed under this chapter for any amount paid or incurred (whether by suit, agreement, or otherwise) to, or at the direction of, a government or governmental entity in relation to the violation of any law or the investigation or inquiry by such government or entity into the potential violation of any law.

(2)

Exception for amounts constituting restitution or paid to come into compliance with law

(A)

In general

Paragraph (1) shall not apply to any amount that—

(i)

the taxpayer establishes—

(I)

constitutes restitution (including remediation of property) for damage or harm which was or may be caused by the violation of any law or the potential violation of any law, or

(II)

is paid to come into compliance with any law which was violated or otherwise involved in the investigation or inquiry described in paragraph (1),

(ii)

is identified as restitution or as an amount paid to come into compliance with such law, as the case may be, in the court order or settlement agreement, and

(iii)

in the case of any amount of restitution for failure to pay any tax imposed under this title in the same manner as if such amount were such tax, would have been allowed as a deduction under this chapter if it had been timely paid.

The identification under clause (ii) alone shall not be sufficient to make the establishment required under clause (i).
(B)

Limitation

Subparagraph (A) shall not apply to any amount paid or incurred as reimbursement to the government or entity for the costs of any investigation or litigation.

(3)

Exception for amounts paid or incurred as the result of certain court orders

Paragraph (1) shall not apply to any amount paid or incurred by reason of any order of a court in a suit in which no government or governmental entity is a party.

(4)

Exception for taxes due

Paragraph (1) shall not apply to any amount paid or incurred as taxes due.

(5)

Treatment of certain nongovernmental regulatory entities

For purposes of this subsection, the following nongovernmental entities shall be treated as governmental entities:

(A)

Any nongovernmental entity which exercises self-regulatory powers (including imposing sanctions) in connection with a qualified board or exchange (as defined in section 1256(g)(7)).

(B)

To the extent provided in regulations, any nongovernmental entity which exercises self-regulatory powers (including imposing sanctions) as part of performing an essential governmental function.

.

(2)

Effective Date

The amendment made by this subsection shall apply to amounts paid or incurred on or after the date of the enactment of this Act, except that such amendments shall not apply to amounts paid or incurred under any binding order or agreement entered into before such date. Such exception shall not apply to an order or agreement requiring court approval unless the approval was obtained before such date.

(b)

Reporting of deductible amounts

(1)

In general

Subpart B of part III of subchapter A of chapter 61 is amended by inserting after section 6050W the following new section:

6050X.

Information with respect to certain fines, penalties, and other amounts

(a)

Requirement of reporting

(1)

In general

The appropriate official of any government or any entity described in section 162(f)(5) which is involved in a suit or agreement described in paragraph (2) shall make a return in such form as determined by the Secretary setting forth—

(A)

the amount required to be paid as a result of the suit or agreement to which paragraph (1) of section 162(f) applies,

(B)

any amount required to be paid as a result of the suit or agreement which constitutes restitution or remediation of property, and

(C)

any amount required to be paid as a result of the suit or agreement for the purpose of coming into compliance with any law which was violated or involved in the investigation or inquiry.

(2)

Suit or agreement described

(A)

In general

A suit or agreement is described in this paragraph if—

(i)

it is—

(I)

a suit with respect to a violation of any law over which the government or entity has authority and with respect to which there has been a court order, or

(II)

an agreement which is entered into with respect to a violation of any law over which the government or entity has authority, or with respect to an investigation or inquiry by the government or entity into the potential violation of any law over which such government or entity has authority, and

(ii)

the aggregate amount involved in all court orders and agreements with respect to the violation, investigation, or inquiry is $600 or more.

(B)

Adjustment of reporting threshold

The Secretary shall adjust the $600 amount in subparagraph (A)(ii) as necessary in order to ensure the efficient administration of the internal revenue laws.

(3)

Time of filing

The return required under this subsection shall be filed at the time the agreement is entered into, as determined by the Secretary.

(b)

Statements To be furnished to individuals involved in the settlement

Every person required to make a return under subsection (a) shall furnish to each person who is a party to the suit or agreement a written statement showing—

(1)

the name of the government or entity, and

(2)

the information supplied to the Secretary under subsection (a)(1).

The written statement required under the preceding sentence shall be furnished to the person at the same time the government or entity provides the Secretary with the information required under subsection (a).
(c)

Appropriate official defined

For purposes of this section, the term appropriate official means the officer or employee having control of the suit, investigation, or inquiry or the person appropriately designated for purposes of this section.

.

(2)

Conforming amendment

The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6050W the following new item:

Sec. 6050X. Information with respect to certain fines, penalties, and other amounts.

.

(3)

Effective Date

The amendments made by this subsection shall apply to amounts paid or incurred on or after the date of the enactment of this Act, except that such amendments shall not apply to amounts paid or incurred under any binding order or agreement entered into before such date. Such exception shall not apply to an order or agreement requiring court approval unless the approval was obtained before such date.

13307.

Denial of deduction for settlements subject to nondisclosure agreements paid in connection with sexual harassment or sexual abuse

(a)

Denial of deduction

Section 162 is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection:

(q)

Payments related to sexual harassment and sexual abuse

No deduction shall be allowed under this chapter for—

(1)

any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or

(2)

attorney's fees related to such a settlement or payment.

.

(b)

Effective date

The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act.

13308.

Repeal of deduction for local lobbying expenses

(a)

In general

Section 162(e) is amended by striking paragraphs (2) and (7) and by redesignating paragraphs (3), (4), (5), (6), and (8) as paragraphs (2), (3), (4), (5), and (6), respectively.

(b)

Conforming amendment

Section 6033(e)(1)(B)(ii) is amended by striking section 162(e)(5)(B)(ii) and inserting section 162(e)(4)(B)(ii).

(c)

Effective date

The amendments made by this section shall apply to amounts paid or incurred on or after the date of the enactment of this Act.

13309.

Recharacterization of certain gains in the case of partnership profits interests held in connection with performance of investment services

(a)

In general

Part IV of subchapter O of chapter 1 is amended—

(1)

by redesignating section 1061 as section 1062, and

(2)

by inserting after section 1060 the following new section:

1061.

Partnership interests held in connection with performance of services

(a)

In general

If one or more applicable partnership interests are held by a taxpayer at any time during the taxable year, the excess (if any) of—

(1)

the taxpayer’s net long-term capital gain with respect to such interests for such taxable year, over

(2)

the taxpayer’s net long-term capital gain with respect to such interests for such taxable year computed by applying paragraphs (3) and (4) of sections 1222 by substituting 3 years for 1 year,

shall be treated as short-term capital gain, notwithstanding section 83 or any election in effect under section 83(b).
(b)

Special rule

To the extent provided by the Secretary, subsection (a) shall not apply to income or gain attributable to any asset not held for portfolio investment on behalf of third party investors.

(c)

Applicable partnership interest

For purposes of this section—

(1)

In general

Except as provided in this paragraph or paragraph (4), the term applicable partnership interest means any interest in a partnership which, directly or indirectly, is transferred to (or is held by) the taxpayer in connection with the performance of substantial services by the taxpayer, or any other related person, in any applicable trade or business. The previous sentence shall not apply to an interest held by a person who is employed by another entity that is conducting a trade or business (other than an applicable trade or business) and only provides services to such other entity.

(2)

Applicable trade or business

The term applicable trade or business means any activity conducted on a regular, continuous, and substantial basis which, regardless of whether the activity is conducted in one or more entities, consists, in whole or in part, of—

(A)

raising or returning capital, and

(B)

either—

(i)

investing in (or disposing of) specified assets (or identifying specified assets for such investing or disposition), or

(ii)

developing specified assets.

(3)

Specified asset

The term specified asset means securities (as defined in section 475(c)(2) without regard to the last sentence thereof), commodities (as defined in section 475(e)(2)), real estate held for rental or investment, cash or cash equivalents, options or derivative contracts with respect to any of the foregoing, and an interest in a partnership to the extent of the partnership’s proportionate interest in any of the foregoing.

(4)

Exceptions

The term applicable partnership interest shall not include—

(A)

any interest in a partnership directly or indirectly held by a corporation, or

(B)

any capital interest in the partnership which provides the taxpayer with a right to share in partnership capital commensurate with—

(i)

the amount of capital contributed (determined at the time of receipt of such partnership interest), or

(ii)

the value of such interest subject to tax under section 83 upon the receipt or vesting of such interest.

(5)

Third party investor

The term third party investor means a person who—

(A)

holds an interest in the partnership which does not constitute property held in connection with an applicable trade or business; and

(B)

is not (and has not been) actively engaged, and is (and was) not related to a person so engaged, in (directly or indirectly) providing substantial services described in paragraph (1) for such partnership or any applicable trade or business.

(d)

Transfer of applicable partnership interest To related person

(1)

In general

If a taxpayer transfers any applicable partnership interest, directly or indirectly, to a person related to the taxpayer, the taxpayer shall include in gross income (as short term capital gain) the excess (if any) of—

(A)

so much of the taxpayer’s long-term capital gains with respect to such interest for such taxable year attributable to the sale or exchange of any asset held for not more than 3 years as is allocable to such interest, over

(B)

any amount treated as short term capital gain under subsection (a) with respect to the transfer of such interest.

(2)

Related person

For purposes of this paragraph, a person is related to the taxpayer if—

(A)

the person is a member of the taxpayer’s family within the meaning of section 318(a)(1), or

(B)

the person performed a service within the current calendar year or the preceding three calendar years in any applicable trade or business in which or for which the taxpayer performed a service.

(e)

Reporting

The Secretary shall require such reporting (at the time and in the manner prescribed by the Secretary) as is necessary to carry out the purposes of this section.

(f)

Regulations

The Secretary shall issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section

.

(b)

Clerical amendment

The table of sections for part IV of subchapter O of chapter 1 is amended by striking the item relating to 1061 and inserting the following new items:

Sec. 1061. Partnership interests held in connection with performance of services.

Sec. 1062. Cross references.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13310.

Prohibition on cash, gift cards, and other non-tangible personal property as employee achievement awards

(a)

In general

Subparagraph (A) of section 274(j)(3) is amended—

(1)

by striking The term and inserting the following:

(i)

In general

The term

.

(2)

by redesignating clauses (i), (ii), and (iii) as subclauses (I), (II), and (III), respectively, and conforming the margins accordingly, and

(3)

by adding at the end the following new clause:

(ii)

Tangible personal property

For purposes of clause (i), the term tangible personal property shall not include—

(I)

cash, cash equivalents, gift cards, gift coupons, or gift certificates (other than arrangements conferring only the right to select and receive tangible personal property from a limited array of such items pre-selected or pre-approved by the employer), or

(II)

vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, other securities, and other similar items.

.

(b)

Effective date

The amendments made by this section shall apply to amounts paid or incurred after December 31, 2017.

13311.

Floor plan financing

(a)

Application of interest limitation

(1)

In general

Section 163(j), as amended by section 13301, is amended—

(A)

in paragraph (1), by striking plus at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting , plus, and by inserting after subparagraph (B) the following new subparagraph:

(C)

the floor plan financing interest of such taxpayer for such taxable year.

, and

(B)

in paragraph (4)(C)(i)(II), by inserting , reduced by the floor plan financing interest, after business interest of the partnership, and

(C)

by redesignating paragraph (9) as paragraph (10) and inserting after paragraph (8) the following new paragraph:

(9)

Floor plan financing interest defined

For purposes of this subsection—

(A)

In general

The term floor plan financing interest means interest paid or accrued on floor plan financing indebtedness.

(B)

Floor plan financing indebtedness

The term floor plan financing indebtedness means indebtedness—

(i)

used to finance the acquisition of motor vehicles held for sale or lease, and

(ii)

secured by the inventory so acquired.

(C)

Motor vehicle

The term motor vehicle means a motor vehicle that is any of the following:

(i)

An automobile.

(ii)

A truck.

(iii)

A recreational vehicle.

(iv)

A motorcycle.

(v)

Any self-propelled vehicle designed for transporting persons or property on a public street, highway, or road.

(vi)

A boat.

(vii)

Farm machinery or equipment.

.

(2)

Effective date

The amendments made by this subsection shall apply to taxable years beginning after December 31, 2017.

(b)

Exception from 100 percent expensing

(1)

In general

Paragraph (6) of section 168(k), as added by section 13201(a)(4), is amended—

(A)

by striking shall not include any property and inserting

shall not include—

(A)

any property

, and

(B)

by adding at the end the following new subparagraph:

(B)

any property used in a trade or business that has had floor plan financing indebtedness (as defined in paragraph (9) of section 163(j)), if the floor plan financing interest related to such indebtedness was taken into account under paragraph (1)(C) of such section.

.

(2)

Effective date

The amendments made by this subsection shall apply to property placed in service after September 27, 2017, in taxable years ending after such date.

13312.

Elimination of deduction for living expenses incurred by members of Congress

(a)

In general

Subsection (a) of section 162 is amended in the matter following paragraph (3) by striking in excess of $3,000.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

V

Business credits

A

General provisions

13401.

Modification of orphan drug credit

(a)

Credit rate

Subsection (a) of section 45C is amended by striking 50 percent and inserting 27.5 percent.

(b)

Election of reduced credit

Subsection (b) of section 280C is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:

(3)

Election of reduced credit

(A)

In general

In the case of any taxable year for which an election is made under this paragraph—

(i)

paragraphs (1) and (2) shall not apply, and

(ii)

the amount of the credit under section 45C(a) shall be the amount determined under subparagraph (B).

(B)

Amount of reduced credit

The amount of credit determined under this subparagraph for any taxable year shall be the amount equal to the excess of—

(i)

the amount of credit determined under section 45C(a) without regard to this paragraph, over

(ii)

the product of—

(I)

the amount described in clause (i), and

(II)

the maximum rate of tax under section 11(b).

(C)

Election

An election under this paragraph for any taxable year shall be made not later than the time for filing the return of tax for such year (including extensions), shall be made on such return, and shall be made in such manner as the Secretary shall prescribe. Such an election, once made, shall be irrevocable.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13402.

Rehabilitation credit limited to certified historic structures

(a)

In general

Subsection (a) of section 47 is amended to read as follows:

(a)

General rule

(1)

In general

For purposes of section 46, for any taxable year during the 5-year period beginning in the taxable year in which a qualified rehabilitated building is placed in service, the rehabilitation credit for such year is an amount equal to the ratable share for such year.

(2)

Ratable share

For purposes of paragraph (1), the ratable share for any taxable year during the period described in such paragraph is the amount equal to 20 percent of the qualified rehabilitation expenditures with respect to the qualified rehabilitated building, as allocated ratably to each year during such period.

.

(b)

Conforming amendments

(1)

Section 47(c) is amended—

(A)

in paragraph (1)—

(i)

in subparagraph (A), by amending clause (iii) to read as follows:

(iii)

such building is a certified historic structure, and

,

(ii)

by striking subparagraph (B), and

(iii)

by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively, and

(B)

in paragraph (2)(B), by amending clause (iv) to read as follows:

(iv)

Certified historic structure

Any expenditure attributable to the rehabilitation of a qualified rehabilitated building unless the rehabilitation is a certified rehabilitation (within the meaning of subparagraph (C)).

.

(2)

Paragraph (4) of section 145(d) is amended—

(A)

by striking of section 47(c)(1)(C) each place it appears and inserting of section 47(c)(1)(B), and

(B)

by striking section 47(c)(1)(C)(i) and inserting section 47(c)(1)(B)(i).

(c)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to amounts paid or incurred after December 31, 2017.

(2)

Transition rule

In the case of qualified rehabilitation expenditures with respect to any building—

(A)

owned or leased by the taxpayer during the entirety of the period after December 31, 2017, and

(B)

with respect to which the 24-month period selected by the taxpayer under section 47(c)(1)(B) of the Internal Revenue Code of 1986 (as amended by subsection (b)) begins not later than 180 days after the date of the enactment of this Act,

the amendments made by this section shall apply to such expenditures paid or incurred after the end of the taxable year in which the 24-month period referred to in subparagraph (B) ends.
13403.

Employer credit for paid family and medical leave

(a)

In general

(1)

Allowance of credit

Subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new section:

45S.

Employer credit for paid family and medical leave

(a)

Establishment of credit

(1)

In general

For purposes of section 38, in the case of an eligible employer, the paid family and medical leave credit is an amount equal to the applicable percentage of the amount of wages paid to qualifying employees during any period in which such employees are on family and medical leave.

(2)

Applicable percentage

For purposes of paragraph (1), the term applicable percentage means 12.5 percent increased (but not above 25 percent) by 0.25 percentage points for each percentage point by which the rate of payment (as described under subsection (c)(1)(B)) exceeds 50 percent.

(b)

Limitation

(1)

In general

The credit allowed under subsection (a) with respect to any employee for any taxable year shall not exceed an amount equal to the product of the normal hourly wage rate of such employee for each hour (or fraction thereof) of actual services performed for the employer and the number of hours (or fraction thereof) for which family and medical leave is taken.

(2)

Non-hourly wage rate

For purposes of paragraph (1), in the case of any employee who is not paid on an hourly wage rate, the wages of such employee shall be prorated to an hourly wage rate under regulations established by the Secretary.

(3)

Maximum amount of leave subject to credit

The amount of family and medical leave that may be taken into account with respect to any employee under subsection (a) for any taxable year shall not exceed 12 weeks.

(c)

Eligible employer

For purposes of this section—

(1)

In general

The term eligible employer means any employer who has in place a policy that meets the following requirements:

(A)

The policy provides—

(i)

in the case of a qualifying employee who is not a part-time employee (as defined in section 4980E(d)(4)(B)), not less than 2 weeks of annual paid family and medical leave, and

(ii)

in the case of a qualifying employee who is a part-time employee, an amount of annual paid family and medical leave that is not less than an amount which bears the same ratio to the amount of annual paid family and medical leave that is provided to a qualifying employee described in clause (i) as—

(I)

the number of hours the employee is expected to work during any week, bears to

(II)

the number of hours an equivalent qualifying employee described in clause (i) is expected to work during the week.

(B)

The policy requires that the rate of payment under the program is not less than 50 percent of the wages normally paid to such employee for services performed for the employer.

(2)

Special rule for certain employers

(A)

In general

An added employer shall not be treated as an eligible employer unless such employer provides paid family and medical leave in compliance with a policy which ensures that the employer—

(i)

will not interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided under the policy, and

(ii)

will not discharge or in any other manner discriminate against any individual for opposing any practice prohibited by the policy.

(B)

Added employer; added employee

For purposes of this paragraph—

(i)

Added employee

The term added employee means a qualifying employee who is not covered by title I of the Family and Medical Leave Act of 1993, as amended.

(ii)

Added employer

The term added employer means an eligible employer (determined without regard to this paragraph), whether or not covered by that title I, who offers paid family and medical leave to added employees.

(3)

Aggregation rule

All persons which are treated as a single employer under subsections (a) and (b) of section 52 shall be treated as a single taxpayer.

(4)

Treatment of benefits mandated or paid for by State or local governments

For purposes of this section, any leave which is paid by a State or local government or required by State or local law shall not be taken into account in determining the amount of paid family and medical leave provided by the employer.

(5)

No inference

Nothing in this subsection shall be construed as subjecting an employer to any penalty, liability, or other consequence (other than ineligibility for the credit allowed by reason of subsection (a) or recapturing the benefit of such credit) for failure to comply with the requirements of this subsection.

(d)

Qualifying employees

For purposes of this section, the term qualifying employee means any employee (as defined in section 3(e) of the Fair Labor Standards Act of 1938, as amended) who—

(1)

has been employed by the employer for 1 year or more, and

(2)

for the preceding year, had compensation not in excess of an amount equal to 60 percent of the amount applicable for such year under clause (i) of section 414(q)(1)(B).

(e)

Family and medical leave

(1)

In general

Except as provided in paragraph (2), for purposes of this section, the term family and medical leave means leave for any 1 or more of the purposes described under subparagraph (A), (B), (C), (D), or (E) of paragraph (1), or paragraph (3), of section 102(a) of the Family and Medical Leave Act of 1993, as amended, whether the leave is provided under that Act or by a policy of the employer.

(2)

Exclusion

If an employer provides paid leave as vacation leave, personal leave, or medical or sick leave (other than leave specifically for 1 or more of the purposes referred to in paragraph (1)), that paid leave shall not be considered to be family and medical leave under paragraph (1).

(3)

Definitions

In this subsection, the terms vacation leave, personal leave, and medical or sick leave mean those 3 types of leave, within the meaning of section 102(d)(2) of that Act.

(f)

Determinations made by Secretary of Treasury

For purposes of this section, any determination as to whether an employer or an employee satisfies the applicable requirements for an eligible employer (as described in subsection (c)) or qualifying employee (as described in subsection (d)), respectively, shall be made by the Secretary based on such information, to be provided by the employer, as the Secretary determines to be necessary or appropriate.

(g)

Wages

For purposes of this section, the term wages has the meaning given such term by subsection (b) of section 3306 (determined without regard to any dollar limitation contained in such section). Such term shall not include any amount taken into account for purposes of determining any other credit allowed under this subpart.

(h)

Election To have credit not apply

(1)

In general

A taxpayer may elect to have this section not apply for any taxable year.

(2)

Other rules

Rules similar to the rules of paragraphs (2) and (3) of section 51(j) shall apply for purposes of this subsection.

(i)

Termination

This section shall not apply to wages paid in taxable years beginning after December 31, 2019.

.

(b)

Credit part of general business credit

Section 38(b) is amended by striking plus at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting , plus, and by adding at the end the following new paragraph:

(37)

in the case of an eligible employer (as defined in section 45S(c)), the paid family and medical leave credit determined under section 45S(a).

.

(c)

Credit allowed against AMT

Subparagraph (B) of section 38(c)(4) is amended by redesignating clauses (ix) through (xi) as clauses (x) through (xii), respectively, and by inserting after clause (viii) the following new clause:

(ix)

the credit determined under section 45S,

.

(d)

Conforming amendments

(1)

Denial of double benefit

Section 280C(a) is amended by inserting 45S(a), after 45P(a),.

(2)

Election to have credit not apply

Section 6501(m) is amended by inserting 45S(h), after 45H(g),.

(3)

Clerical amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

Sec. 45S. Employer credit for paid family and medical leave.

.

(e)

Effective date

The amendments made by this section shall apply to wages paid in taxable years beginning after December 31, 2017.

B

Provisions relating to low-income housing credit

13411.

Treatment of veterans' preference as not violating general public use requirements

(a)

In general

Subparagraph (C) of section 42(g)(9) is amended to read as follows:

(C)

who are veterans of the Armed Forces.

.

(b)

Effective date

The amendment made by this section shall apply to buildings placed in service before, on, or after the date of the enactment of this Act.

13412.

Increase in credit for certain rural housing

(a)

In general

Section 42(d)(5)(B) is amended by adding at the end the following new clause:

(vi)

Certain new buildings in rural areas

For purposes of clause (i), a building described in subsection (b)(1)(B)(i) which is located in a rural area (as defined in section 520 of the Housing Act of 1949) shall be treated in the same manner as a new building located in a difficult development area which is designated for purposes of this subparagraph.

.

(b)

Offset

Section 42(d)(5)(B)(i) is amended by striking 130 percent both places it appears in subclauses (I) and (II) and inserting 125 percent.

(c)

Effective date

The amendments made by this section shall apply to buildings placed in service after the date of the enactment of this Act.

VI

Provisions related to specific entities and industries

A

Partnership provisions

13501.

Treatment of gain or loss of foreign persons from sale or exchange of interests in partnerships engaged in trade or business within the United States

(a)

In general

Section 864(c) is amended by adding at the end the following:

(8)

Gain or loss of foreign persons from sale or exchange of certain partnership interests

(A)

In general

Notwithstanding any other provision of this subtitle, if a nonresident alien individual or foreign corporation owns, directly or indirectly, an interest in a partnership which is engaged in any trade or business within the United States, gain or loss on the sale or exchange of all (or any portion of) such interest shall be treated as effectively connected with the conduct of such trade or business to the extent such gain or loss does not exceed the amount determined under subparagraph (B).

(B)

Amount treated as effectively connected

The amount determined under this subparagraph with respect to any partnership interest sold or exchanged—

(i)

in the case of any gain on the sale or exchange of the partnership interest, is—

(I)

the portion of the partner's distributive share of the amount of gain which would have been effectively connected with the conduct of a trade or business within the United States if the partnership had sold all of its assets at their fair market value as of the date of the sale or exchange of such interest, or

(II)

zero if no gain on such deemed sale would have been so effectively connected, and

(ii)

in the case of any loss on the sale or exchange of the partnership interest, is—

(I)

the portion of the partner's distributive share of the amount of loss on the deemed sale described in clause (i)(I) which would have been so effectively connected, or

(II)

zero if no loss on such deemed sale would be have been so effectively connected.

For purposes of this subparagraph, a partner's distributive share of gain or loss on the deemed sale shall be determined in the same manner as such partner’s distributive share of the non-separately stated taxable income or loss of such partnership.
(C)

Coordination with United States real property interests

If a partnership described in subparagraph (A) holds any United States real property interest (as defined in section 897(c)) at the time of the sale or exchange of the partnership interest, then the gain or loss treated as effectively connected income under subparagraph (A) shall be reduced by the amount so treated with respect to such United States real property interest under section 897.

(D)

Sale or exchange

For purposes of this paragraph, an individual or corporation shall be treated as having sold or exchanged any interest in a partnership if, under any provision of this subtitle, gain or loss is realized from the sale or exchange of such interest.

(E)

Secretarial authority

The Secretary shall prescribe such regulations as the Secretary determines appropriate for the application of this paragraph, including regulations which provide that, notwithstanding subparagraph (D), this paragraph applies in a case even if gain or loss from a sale or exchange would not be realized under any other provision of this subtitle.

.

(b)

Withholding requirements

Section 1446 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following:

(f)

Special rules for withholding on sales of partnership interests

(1)

In general

Except as provided in this subsection, if any portion of the gain (if any) on any disposition of an interest in a partnership would be treated under section 864(c)(8) as effectively connected with the conduct of a trade or business within the United States, the transferee shall be required to deduct and withhold a tax equal to 10 percent of the amount realized on the disposition.

(2)

Exception if nonforeign affidavit furnished

(A)

In general

No person shall be required to deduct and withhold any amount under paragraph (1) with respect to any disposition if the transferor furnishes to the transferee an affidavit by the transferor stating, under penalty of perjury, the transferor’s United States taxpayer identification number and that the transferor is not a foreign person.

(B)

False affidavit

Subparagraph (A) shall not apply to any disposition if—

(i)

the transferee has actual knowledge that the affidavit is false, or the transferee receives a notice (as described in section 1445(d)) from a transferor’s agent or transferee’s agent that such affidavit or statement is false, or

(ii)

the Secretary by regulations requires the transferee to furnish a copy of such affidavit or statement to the Secretary and the transferee fails to furnish a copy of such affidavit or statement to the Secretary at such time and in such manner as required by such regulations.

(C)

Rules for agents

The rules of section 1445(d) shall apply to a transferor’s agent or transferee’s agent with respect to any affidavit described in subparagraph (A) in the same manner as such rules apply with respect to the disposition of a United States real property interest under such section.

(3)

Authority of Secretary to prescribe reduced amount

At the request of the transferor or transferee, the Secretary may prescribe a reduced amount to be withheld under this section if the Secretary determines that to substitute such reduced amount will not jeopardize the collection of the tax imposed under this title with respect to gain treated under section 864(c)(8) as effectively connected with the conduct of a trade or business with in the United States.

(4)

Partnership to withhold amounts not withheld by the transferee

If a transferee fails to withhold any amount required to be withheld under paragraph (1), the partnership shall be required to deduct and withhold from distributions to the transferee a tax in an amount equal to the amount the transferee failed to withhold (plus interest under this title on such amount).

(5)

Definitions

Any term used in this subsection which is also used under section 1445 shall have the same meaning as when used in such section.

(6)

Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including regulations providing for exceptions from the provisions of this subsection.

.

(c)

Effective date

The amendments made by this section shall apply to sales and exchanges on or after November 27, 2017.

13502.

Modify definition of substantial built-in loss in the case of transfer of partnership interest

(a)

In general

Paragraph (1) of section 743(d) is to read as follows:

(1)

In general

For purposes of this section, a partnership has a substantial built-in loss with respect to a transfer of an interest in the partnership if—

(A)

the partnership’s adjusted basis in the partnership property exceeds by more than $250,000 the fair market value of such property, or

(B)

the transferee partner would be allocated a loss of more than $250,000 if the partnership assets were sold for cash equal to their fair market value immediately after such transfer.

.

(b)

Effective date

The amendments made by this section shall apply to transfers of partnership interests after December 31, 2017.

13503.

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

(a)

In general

Subsection (d) of section 704 is amended—

(1)

by striking A partner’s distributive share and inserting the following:

(1)

In general

A partner’s distributive share

,

(2)

by striking Any excess of such loss and inserting the following:

(2)

Carryover

Any excess of such loss

, and

(3)

by adding at the end the following new paragraph:

(3)

Special rules

(A)

In general

In determining the amount of any loss under paragraph (1), there shall be taken into account the partner’s distributive share of amounts described in paragraphs (4) and (6) of section 702(a).

(B)

Exception

In the case of a charitable contribution of property whose fair market value exceeds its adjusted basis, subparagraph (A) shall not apply to the extent of the partner’s distributive share of such excess.

.

(b)

Effective date

The amendments made by this section shall apply to partnership taxable years beginning after December 31, 2017.

B

Insurance reforms

13511.

Net operating losses of life insurance companies

(a)

In general

Section 805(b) is amended by striking paragraph (4) and by redesignating paragraph (5) as paragraph (4).

(b)

Conforming amendments

(1)

Part I of subchapter L of chapter 1 is amended by striking section 810 (and by striking the item relating to such section in the table of sections for such part).

(2)
(A)

Part III of subchapter L of chapter 1 is amended by striking section 844 (and by striking the item relating to such section in the table of sections for such part).

(B)

Section 831(b)(3) is amended by striking except as provided in section 844,

(3)

Section 381 is amended by striking subsection (d).

(4)

Section 805(a)(4)(B)(ii) is amended to read as follows:

(ii)

the deduction allowed under section 172,

.

(5)

Section 805(a) is amended by striking paragraph (5).

(6)

Section 805(b)(2)(A)(iv) is amended to read as follows:

(iv)

any net operating loss carryback to the taxable year under section 172, and

.

(7)

Section 953(b)(1)(B) is amended to read as follows:

(B)

So much of section 805(a)(8) as relates to the deduction allowed under section 172.

.

(8)

Section 1351(i)(3) is amended by striking or the operations loss deduction under section 810,.

(c)

Effective date

The amendments made by this section shall apply to losses arising in taxable years beginning after December 31, 2017.

13512.

Repeal of small life insurance company deduction

(a)

In general

Part I of subchapter L of chapter 1 is amended by striking section 806 (and by striking the item relating to such section in the table of sections for such part).

(b)

Conforming amendments

(1)

Section 453B(e) is amended—

(A)

by striking (as defined in section 806(b)(3)) in paragraph (2)(B), and

(B)

by adding at the end the following new paragraph:

(3)

Noninsurance business

(A)

In general

For purposes of this subsection, the term noninsurance business means any activity which is not an insurance business.

(B)

Certain activities treated as insurance businesses

For purposes of subparagraph (A), any activity which is not an insurance business shall be treated as an insurance business if—

(i)

it is of a type traditionally carried on by life insurance companies for investment purposes, but only if the carrying on of such activity (other than in the case of real estate) does not constitute the active conduct of a trade or business, or

(ii)

it involves the performance of administrative services in connection with plans providing life insurance, pension, or accident and health benefits.

.

(2)

Section 465(c)(7)(D)(v)(II) is amended by striking section 806(b)(3) and inserting section 453B(e)(3).

(3)

Section 801(a)(2) is amended by striking subparagraph (C).

(4)

Section 804 is amended by striking means— and all that follows and inserting means the general deductions provided in section 805..

(5)

Section 805(a)(4)(B), as amended by this Act, is amended by striking clause (i) and by redesignating clauses (ii), (iii), and (iv) as clauses (i), (ii), and (iii), respectively.

(6)

Section 805(b)(2)(A), as amended by this Act, is amended by striking clause (iii) and by redesignating clauses (iv) and (v) as clauses (iii) and (iv), respectively.

(7)

Section 842(c) is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.

(8)

Section 953(b)(1), as amended by section 13511, is amended by striking subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13513.

Adjustment for change in computing reserves

(a)

In general

Paragraph (1) of section 807(f) is amended to read as follows:

(1)

Treatment as change in method of accounting

If the basis for determining any item referred to in subsection (c) as of the close of any taxable year differs from the basis for such determination as of the close of the preceding taxable year, then so much of the difference between—

(A)

the amount of the item at the close of the taxable year, computed on the new basis, and

(B)

the amount of the item at the close of the taxable year, computed on the old basis,

as is attributable to contracts issued before the taxable year shall be taken into account under section 481 as adjustments attributable to a change in method of accounting initiated by the taxpayer and made with the consent of the Secretary.

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13514.

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

(a)

In general

Subpart D of part I of subchapter L is amended by striking section 815 (and by striking the item relating to such section in the table of sections for such subpart).

(b)

Conforming amendment

Section 801 is amended by striking subsection (c).

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

(d)

Phased inclusion of remaining balance of policyholders surplus accounts

In the case of any stock life insurance company which has a balance (determined as of the close of such company’s last taxable year beginning before January 1, 2018) in an existing policyholders surplus account (as defined in section 815 of the Internal Revenue Code of 1986, as in effect before its repeal), the tax imposed by section 801 of such Code for the first 8 taxable years beginning after December 31, 2017, shall be the amount which would be imposed by such section for such year on the sum of—

(1)

life insurance company taxable income for such year (within the meaning of such section 801 but not less than zero), plus

(2)

1/8 of such balance.

13515.

Modification of proration rules for property and casualty insurance companies

(a)

In general

Section 832(b)(5)(B) is amended—

(1)

by striking 15 percent and inserting the applicable percentage, and

(2)

by inserting at the end the following new sentence: For purposes of this subparagraph, the applicable percentage is 5.25 percent divided by the highest rate in effect under section 11(b)..

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13516.

Repeal of special estimated tax payments

(a)

In general

Part III of subchapter L of chapter 1 is amended by striking section 847 (and by striking the item relating to such section in the table of sections for such part).

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13517.

Computation of life insurance tax reserves

(a)

In general

(1)

Computation of reserves

Section 807(c) is amended to read as follows:

(c)

Items taken into account

The items referred to in subsections (a) and (b) are as follows—

(1)

The life insurance reserves (as defined in section 816(b)).

(2)

The unearned premiums and unpaid losses included in total reserves under section 816(c)(2).

(3)

The amounts (discounted at the appropriate rate of interest) necessary to satisfy the obligations under insurance and annuity contracts, but only if such obligations do not involve (at the time with respect to which the computation is made under this paragraph) life, accident, or health contingencies.

(4)

Dividend accumulations, and other amounts, held at interest in connection with insurance and annuity contracts.

(5)

Premiums received in advance, and liabilities for premium deposit funds.

(6)

Reasonable special contingency reserves under contracts of group term life insurance or group accident and health insurance which are established and maintained for the provision of insurance on retired lives, for premium stabilization, or a combination thereof.

For purposes of paragraph (3), the appropriate rate of interest is the highest rate or rates permitted to be used to discount the obligations by the National Association of Insurance Commissioners as of the date the reserve is determined. In no case shall the amount determined under paragraph (3) for any contract be less than the net surrender value of such contract. For purposes of paragraph (2) and section 805(a)(1), the amount of the unpaid losses (other than losses on life insurance contracts) shall be the amount of the discounted unpaid losses as defined in section 846.

.

(2)

Section 807(d) is amended—

(A)

by striking paragraphs (1), (2), (4), and (5),

(B)

by redesignating paragraph (6) as paragraph (4),

(C)

by inserting before paragraph (3) the following new paragraphs:

(1)

Determination of reserve

(A)

In general

For purposes of this part (other than section 816), the amount of the life insurance reserves for any contract (other than a contract to which subparagraph (B) applies) shall be the greater of—

(i)

the net surrender value of such contract, or

(ii)

92.87 percent of the reserve determined under paragraph (2).

(B)

Variable contracts

For purposes of this part (other than section 816), the amount of the life insurance reserves for a variable contract shall be equal to the sum of—

(i)

the greater of—

(I)

the net surrender value of such contract, or

(II)

the portion of the reserve that is separately accounted for under section 817, plus

(ii)

92.87 percent of the excess (if any) of the reserve determined under paragraph (2) over the amount in clause (i).

(C)

Statutory cap

In no event shall the reserves determined under subparagraphs (A) or (B) for any contract as of any time exceed the amount which would be taken into account with respect to such contract as of such time in determining statutory reserves (as defined in paragraph (4)).

(2)

Amount of reserve

The amount of the reserve determined under this paragraph with respect to any contract shall be determined by using the tax reserve method applicable to such contract.

,

(D)

by striking (as of the date of issuance) in paragraph (3)(A)(iv)(I) and inserting (as of the date the reserve is determined),

(E)

by striking as of the date of the issuance of in paragraph (3)(A)(iv)(II) and inserting as of the date the reserve is determined for,

(F)

by striking in effect on the date of the issuance of the contract in paragraph (3)(B)(i) and inserting applicable to the contract and in effect as of the date the reserve is determined, and

(G)

by striking in effect on the date of the issuance of the contract in paragraph (3)(B)(ii) and inserting applicable to the contract and in effect as of the date the reserve is determined.

(3)

Section 807(e) is amended—

(A)

by striking paragraphs (2) and (5),

(B)

by redesignating paragraphs (3), (4), (6), and (7) as paragraphs (2), (3), (4), and (5), respectively,

(C)

by amending paragraph (2) (as so redesignated) to read as follows:

(2)

Qualified supplemental benefits

(A)

Qualified supplemental benefits treated separately

For purposes of this part, the amount of the life insurance reserve for any qualified supplemental benefit shall be computed separately as though such benefit were under a separate contract.

(B)

Qualified supplemental benefit

For purposes of this paragraph, the term qualified supplemental benefit means any supplemental benefit described in subparagraph (C) if—

(i)

there is a separately identified premium or charge for such benefit, and

(ii)

any net surrender value under the contract attributable to any other benefit is not available to fund such benefit.

(C)

Supplemental benefits

For purposes of this paragraph, the supplemental benefits described in this subparagraph are any—

(i)

guaranteed insurability,

(ii)

accidental death or disability benefit,

(iii)

convertibility,

(iv)

disability waiver benefit, or

(v)

other benefit prescribed by regulations,

which is supplemental to a contract for which there is a reserve described in subsection (c).

, and

(D)

by adding at the end the following new paragraph:

(6)

Reporting rules

The Secretary shall require reporting (at such time and in such manner as the Secretary shall prescribe) with respect to the opening balance and closing balance of reserves and with respect to the method of computing reserves for purposes of determining income.

.

(4)

Section 7702 is amended—

(A)

by striking clause (i) of subsection (c)(3)(B) and inserting the following:

(i)

reasonable mortality charges which meet the requirements prescribed in regulations to be promulgated by the Secretary or that do not exceed the mortality charges specified in the prevailing commissioners’ standard tables as defined in subsection (f)(10),

and

(B)

by adding at the end of subsection (f) the following new paragraph:

(10)

Prevailing commissioners’ standard tables

For purposes of subsection (c)(3)(B)(i), the term prevailing commissioners' standard tables means the most recent commissioners’ standard tables prescribed by the National Association of Insurance Commissioners which are permitted to be used in computing reserves for that type of contract under the insurance laws of at least 26 States when the contract was issued. If the prevailing commissioners’ standard tables as of the beginning of any calendar year (hereinafter in this paragraph referred to as the year of change) are different from the prevailing commissioners’ standard tables as of the beginning of the preceding calendar year, the issuer may use the prevailing commissioners’ standard tables as of the beginning of the preceding calendar year with respect to any contract issued after the change and before the close of the 3-year period beginning on the first day of the year of change.

.

(b)

Conforming amendments

(1)

Section 808 is amended by adding at the end the following new subsection:

(g)

Prevailing State assumed interest rate

For purposes of this subchapter—

(1)

In general

The term prevailing State assumed interest rate means, with respect to any contract, the highest assumed interest rate permitted to be used in computing life insurance reserves for insurance contracts or annuity contracts (as the case may be) under the insurance laws of at least 26 States. For purposes of the preceding sentence, the effect of nonforfeiture laws of a State on interest rates for reserves shall not be taken into account.

(2)

When rate determined

The prevailing State assumed interest rate with respect to any contract shall be determined as of the beginning of the calendar year in which the contract was issued.

.

(2)

Paragraph (1) of section 811(d) is amended by striking the greater of the prevailing State assumed interest rate or applicable Federal interest rate in effect under section 807 and inserting the interest rate in effect under section 808(g).

(3)

Subparagraph (A) of section 846(f)(6) is amended by striking except that and all that follows and inserting except that the limitation of subsection (a)(3) shall apply, and.

(4)

Subparagraph (B) of section 954(i)(5) is amended by striking shall apply, and.

(c)

Effective date

(1)

In general

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

(2)

Transition rule

For the first taxable year beginning after December 31, 2017, the reserve with respect to any contract (as determined under section 807(d)(2) of the Internal Revenue Code of 1986) at the end of the preceding taxable year shall be determined as if the amendments made by this section had applied to such reserve in such preceding taxable year.

(3)

Transition relief

(A)

In general

If—

(i)

the reserve determined under section 807(d)(2) of the Internal Revenue Code of 1986 (determined without regard to the amendments made by this section) with respect to any contract as of the close of the year preceding the first taxable year beginning after December 31, 2017, differs from

(ii)

the reserve which would have been determined with respect to such contract as of the close of such taxable year under such section determined without regard to paragraph (2),

then the difference between the amount of the reserve described in clause (i) and the amount of the reserve described in clause (ii) shall be taken into account under the method provided in subparagraph (B).
(B)

Method

The method provided in this subparagraph is as follows:

(i)

If the amount determined under subparagraph (A)(i) exceeds the amount determined under subparagraph (A)(ii), 1/8 of such excess shall be taken into account, for each of the 8 succeeding taxable years, as a deduction under section 805(a)(2) or 832(c)(4) of such Code, as applicable.

(ii)

If the amount determined under subparagraph (A)(ii) exceeds the amount determined under subparagraph (A)(i), 1/8 of such excess shall be included in gross income, for each of the 8 succeeding taxable years, under section 803(a)(2) or 832(b)(1)(C) of such Code, as applicable.

13518.

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

(a)

In general

Section 812 is amended to read as follows:

812.

Definition of company’s share and policyholder’s share

(a)

Company’s share

For purposes of section 805(a)(4), the term company’s share means, with respect to any taxable year beginning after December 31, 2017, 70 percent.

(b)

Policyholder’s share

For purposes of section 807, the term policyholder’s share means, with respect to any taxable year beginning after December 31, 2017, 30 percent.

.

(b)

Conforming amendment

Section 817A(e)(2) is amended by striking , 807(d)(2)(B), and 812 and inserting and 807(d)(2)(B).

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13519.

Capitalization of certain policy acquisition expenses

(a)

In general

(1)

Section 848(a)(2) is amended by striking 120-month and inserting “180-month”.

(2)

Section 848(c)(1) is amended by striking 1.75 percent and inserting “2.1 percent”.

(3)

Section 848(c)(2) is amended by striking 2.05 percent and inserting “2.46 percent”.

(4)

Section 848(c)(3) is amended by striking 7.7 percent and inserting “9.24 percent”.

(b)

Conforming amendments

Section 848(b)(1) is amended by striking “120-month” and inserting 180-month.

(c)

Effective date

(1)

In general

The amendments made by this section shall apply to net premiums for taxable years beginning after December 31, 2017.

(2)

Transition rule

Specified policy acquisition expenses first required to be capitalized in a taxable year beginning before January 1, 2018, will continue to be allowed as a deduction ratably over the 120-month period beginning with the first month in the second half of such taxable year.

13520.

Tax reporting for life settlement transactions

(a)

In general

Subpart B of part III of subchapter A of chapter 61, as amended by section 13306, is amended by adding at the end the following new section:

6050Y.

Returns relating to certain life insurance contract transactions

(a)

Requirement of reporting of certain payments

(1)

In general

Every person who acquires a life insurance contract or any interest in a life insurance contract in a reportable policy sale during any taxable year shall make a return for such taxable year (at such time and in such manner as the Secretary shall prescribe) setting forth—

(A)

the name, address, and TIN of such person,

(B)

the name, address, and TIN of each recipient of payment in the reportable policy sale,

(C)

the date of such sale,

(D)

the name of the issuer of the life insurance contract sold and the policy number of such contract, and

(E)

the amount of each payment.

(2)

Statement to be furnished to persons with respect to whom information is required

Every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing—

(A)

the name, address, and phone number of the information contact of the person required to make such return, and

(B)

the information required to be shown on such return with respect to such person, except that in the case of an issuer of a life insurance contract, such statement is not required to include the information specified in paragraph (1)(E).

(b)

Requirement of reporting of seller's basis in life insurance contracts

(1)

In general

Upon receipt of the statement required under subsection (a)(2) or upon notice of a transfer of a life insurance contract to a foreign person, each issuer of a life insurance contract shall make a return (at such time and in such manner as the Secretary shall prescribe) setting forth—

(A)

the name, address, and TIN of the seller who transfers any interest in such contract in such sale,

(B)

the investment in the contract (as defined in section 72(e)(6)) with respect to such seller, and

(C)

the policy number of such contract.

(2)

Statement to be furnished to persons with respect to whom information is required

Every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing—

(A)

the name, address, and phone number of the information contact of the person required to make such return, and

(B)

the information required to be shown on such return with respect to each seller whose name is required to be set forth in such return.

(c)

Requirement of reporting with respect to reportable death benefits

(1)

In general

Every person who makes a payment of reportable death benefits during any taxable year shall make a return for such taxable year (at such time and in such manner as the Secretary shall prescribe) setting forth—

(A)

the name, address, and TIN of the person making such payment,

(B)

the name, address, and TIN of each recipient of such payment,

(C)

the date of each such payment,

(D)

the gross amount of each such payment, and

(E)

such person's estimate of the investment in the contract (as defined in section 72(e)(6)) with respect to the buyer.

(2)

Statement to be furnished to persons with respect to whom information is required

Every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing—

(A)

the name, address, and phone number of the information contact of the person required to make such return, and

(B)

the information required to be shown on such return with respect to each recipient of payment whose name is required to be set forth in such return.

(d)

Definitions

For purposes of this section:

(1)

Payment

The term payment means, with respect to any reportable policy sale, the amount of cash and the fair market value of any consideration transferred in the sale.

(2)

Reportable policy sale

The term reportable policy sale has the meaning given such term in section 101(a)(3)(B).

(3)

Issuer

The term issuer means any life insurance company that bears the risk with respect to a life insurance contract on the date any return or statement is required to be made under this section.

(4)

Reportable death benefits

The term reportable death benefits means amounts paid by reason of the death of the insured under a life insurance contract that has been transferred in a reportable policy sale.

.

(b)

Clerical amendment

The table of sections for subpart B of part III of subchapter A of chapter 61, as amended by section 13306, is amended by inserting after the item relating to section 6050X the following new item:

Sec. 6050Y. Returns relating to certain life insurance contract transactions.

.

(c)

Conforming amendments

(1)

Subsection (d) of section 6724 is amended—

(A)

by striking or at the end of clause (xxiv) of paragraph (1)(B), by striking and at the end of clause (xxv) of such paragraph and inserting or, and by inserting after such clause (xxv) the following new clause:

(xxvi)

section 6050Y (relating to returns relating to certain life insurance contract transactions), and

, and

(B)

by striking or at the end of subparagraph (HH) of paragraph (2), by striking the period at the end of subparagraph (II) of such paragraph and inserting , or, and by inserting after such subparagraph (II) the following new subparagraph:

(JJ)

subsection (a)(2), (b)(2), or (c)(2) of section 6050Y (relating to returns relating to certain life insurance contract transactions).

.

(2)

Section 6047 is amended—

(A)

by redesignating subsection (g) as subsection (h),

(B)

by inserting after subsection (f) the following new subsection:

(g)

Information relating to life insurance contract transactions

This section shall not apply to any information which is required to be reported under section 6050Y.

, and

(C)

by adding at the end of subsection (h), as so redesignated, the following new paragraph:

(4)

For provisions requiring reporting of information relating to certain life insurance contract transactions, see section 6050Y.

.

(d)

Effective date

The amendments made by this section shall apply to—

(1)

reportable policy sales (as defined in section 6050Y(d)(2) of the Internal Revenue Code of 1986 (as added by subsection (a)) after December 31, 2017, and

(2)

reportable death benefits (as defined in section 6050Y(d)(4) of such Code (as added by subsection (a)) paid after December 31, 2017.

13521.

Clarification of tax basis of life insurance contracts

(a)

Clarification with respect To adjustments

Paragraph (1) of section 1016(a) is amended by striking subparagraph (A) and all that follows and inserting the following:

(A)

for—

(i)

taxes or other carrying charges described in section 266; or

(ii)

expenditures described in section 173 (relating to circulation expenditures),

for which deductions have been taken by the taxpayer in determining taxable income for the taxable year or prior taxable years; or
(B)

for mortality, expense, or other reasonable charges incurred under an annuity or life insurance contract;

.

(b)

Effective date

The amendment made by this section shall apply to transactions entered into after August 25, 2009.

13522.

Exception to transfer for valuable consideration rules

(a)

In general

Subsection (a) of section 101 is amended by inserting after paragraph (2) the following new paragraph:

(3)

Exception to valuable consideration rules for commercial transfers

(A)

In general

The second sentence of paragraph (2) shall not apply in the case of a transfer of a life insurance contract, or any interest therein, which is a reportable policy sale.

(B)

Reportable policy sale

For purposes of this paragraph, the term reportable policy sale means the acquisition of an interest in a life insurance contract, directly or indirectly, if the acquirer has no substantial family, business, or financial relationship with the insured apart from the acquirer's interest in such life insurance contract. For purposes of the preceding sentence, the term indirectly applies to the acquisition of an interest in a partnership, trust, or other entity that holds an interest in the life insurance contract.

.

(b)

Conforming amendment

Paragraph (1) of section 101(a) is amended by striking paragraph (2) and inserting paragraphs (2) and (3).

(c)

Effective date

The amendments made by this section shall apply to transfers after December 31, 2017.

C

Banks and Financial Instruments

13531.

Limitation on deduction for FDIC premiums

(a)

In general

Section 162, as amended by sections 13307 and 13308, is amended by redesignating subsection (s) as subsection (t) and by inserting after subsection (r) the following new subsection:

(s)

Disallowance of FDIC premiums paid by certain large financial institutions

(1)

In general

No deduction shall be allowed for the applicable percentage of any FDIC premium paid or incurred by the taxpayer.

(2)

Exception for small institutions

Paragraph (1) shall not apply to any taxpayer for any taxable year if the total consolidated assets of such taxpayer (determined as of the close of such taxable year) do not exceed $10,000,000,000.

(3)

Applicable percentage

For purposes of this subsection, the term applicable percentage means, with respect to any taxpayer for any taxable year, the ratio (expressed as a percentage but not greater than 100 percent) which—

(A)

the excess of—

(i)

the total consolidated assets of such taxpayer (determined as of the close of such taxable year), over

(ii)

$10,000,000,000, bears to

(B)

$40,000,000,000.

(4)

FDIC premiums

For purposes of this subsection, the term FDIC premium means any assessment imposed under section 7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)).

(5)

Total consolidated assets

For purposes of this subsection, the term total consolidated assets has the meaning given such term under section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5365).

(6)

Aggregation rule

(A)

In general

Members of an expanded affiliated group shall be treated as a single taxpayer for purposes of applying this subsection.

(B)

Expanded affiliated group

(i)

In general

For purposes of this paragraph, the term expanded affiliated group means an affiliated group as defined in section 1504(a), determined—

(I)

by substituting more than 50 percent for at least 80 percent each place it appears, and

(II)

without regard to paragraphs (2) and (3) of section 1504(b).

(ii)

Control of non-corporate entities

A partnership or any other entity (other than a corporation) shall be treated as a member of an expanded affiliated group if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this clause).

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13532.

Repeal of advance refunding bonds

(a)

In general

Paragraph (1) of section 149(d) is amended by striking as part of an issue described in paragraph (2), (3), or (4). and inserting to advance refund another bond..

(b)

Conforming amendments

(1)

Section 149(d) is amended by striking paragraphs (2), (3), (4), and (6) and by redesignating paragraphs (5) and (7) as paragraphs (2) and (3).

(2)

Section 148(f)(4)(C) is amended by striking clause (xiv) and by redesignating clauses (xv) to (xvii) as clauses (xiv) to (xvi).

(c)

Effective date

The amendments made by this section shall apply to advance refunding bonds issued after December 31, 2017.

13533.

Cost basis of specified securities determined without regard to identification

(a)

In general

Section 1012 is amended by adding at the end the following new subsection:

(e)

Cost basis of specified securities determined without regard to identification

(1)

In general

Unless the Secretary permits the use of an average basis method for determining cost, in the case of the sale, exchange, or other disposition of a specified security (within the meaning of section 6045(g)(3)(B)), the basis (and holding period) of such security shall be determined on a first-in first-out basis.

(2)

Exception

In the case of a sale, exchange, or other disposition of a specified security by a regulated investment company (as defined in section 851(a)), paragraph (1) shall not apply.

.

(b)

Conforming amendments

(1)

Section 1012(c)(1) is amended by striking the conventions prescribed by regulations under this section and inserting the method applicable for determining the cost of such security.

(2)

Section 1012(c)(2)(A) is amended by inserting (as in effect prior to the enactment of the Tax Cuts and Jobs Act) after this section.

(3)

Section 6045(g)(2)(B)(i)(I) is amended by striking unless the customer notifies the broker by means of making an adequate identification of the stock sold or transferred.

(c)

Effective date

The amendments made by this section shall apply to sales, exchanges, and other dispositions after December 31, 2017.

D

S Corporations

13541.

Expansion of qualifying beneficiaries of an electing small business trust

(a)

No look-Through for eligibility purposes

Section 1361(c)(2)(B)(v) is amended by adding at the end the following new sentence: This clause shall not apply for purposes of subsection (b)(1)(C)..

(b)

Effective date

The amendment made by this section shall take effect on January 1, 2018.

13542.

Charitable contribution deduction for electing small business trusts

(a)

In general

Section 641(c)(2) is amended by inserting after subparagraph (D) the following new subparagraph:

(E)
(i)

Section 642(c) shall not apply.

(ii)

For purposes of section 170(b)(1)(G), adjusted gross income shall be computed in the same manner as in the case of an individual, except that the deductions for costs which are paid or incurred in connection with the administration of the trust and which would not have been incurred if the property were not held in such trust shall be treated as allowable in arriving at adjusted gross income.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

13543.

Modification of treatment of S corporation conversions to C corporations

(a)

Adjustments attributable to conversion from s corporation to c corporation

Section 481 is amended by adding at the end the following new sub-section:

(d)

Adjustments attributable to conversion from s corporation to c corporation

(1)

IN GENERAL.—In the case of an eligible terminated S corporation, any increase in tax under this chapter by reason of an adjustment required by subsection (a)(2), and which is attributable to such corporation’s revocation described in paragraph (2)(A)(ii), shall be taken into account ratably during the 6-taxable year period beginning with the year of change.

.

(b)

In general

Section 1371 is amended by adding at the end the following new subsection:

(f)

Cash distributions following post-termination transition period

(1)

In general

In the case of a distribution of money by an eligible terminated S corporation after the post-termination transition period, the accumulated adjustments account shall be allocated to such distribution, and the distribution shall be chargeable to accumulated earnings and profits, in the same ratio as the amount of such accumulated adjustments account bears to the amount of such accumulated earnings and profits.

(2)

Eligible terminated S corporation

For purposes of this subsection, the term eligible terminated S corporation means any C corporation—

(A)

which—

(i)

was an S corporation on the day before the date of the enactment of the Tax Cuts and Jobs Act, and

(ii)

during the 2-year period beginning on the date of such enactment makes a revocation of its election under section 1362(a), and

(B)

the owners of the stock of which, determined on the date such revocation is made, are the same owners (and in identical proportions) as on the date of such enactment.

.

(c)

Effective date

The amendments made by this section shall apply to distributions after the date of the enactment of this Act.

VII

Employment

A

Compensation

13601.

Modification of limitation on excessive employee remuneration

(a)

Repeal of performance-based compensation and commission exceptions for limitation on excessive employee remuneration

(1)

In general

Paragraph (4) of section 162(m) is amended by striking subparagraphs (B) and (C) and by redesignating subparagraphs (D), (E), (F), and (G) as subparagraphs (B), (C), (D), and (E), respectively.

(2)

Conforming amendments

(A)

Paragraphs (5)(E) and (6)(D) of section 162(m) are each amended by striking subparagraphs (B), (C), and (D) and inserting subparagraph (B).

(B)

Paragraphs (5)(G) and (6)(G) of section 162(m) are each amended by striking (F) and (G) and inserting (D) and (E).

(b)

Modification of definition of covered employees

Paragraph (3) of section 162(m) is amended—

(1)

in subparagraph (A), by striking as of the close of the taxable year, such employee is the chief executive officer of the taxpayer or is and inserting such employee is the principal executive officer or principal financial officer of the taxpayer at any time during the taxable year, or was,

(2)

in subparagraph (B)—

(A)

by striking 4 and inserting 3, and

(B)

by striking (other than the chief executive officer) and inserting (other than any individual described in subparagraph (A)), and

(3)

by striking or at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting , or, and by adding at the end the following:

(C)

was a covered employee of the taxpayer (or any predecessor) for any preceding taxable year beginning after December 31, 2016.

.

(c)

Expansion of applicable employer

(1)

In general

Section 162(m)(2) is amended to read as follows:

(2)

Publicly held corporation

For purposes of this subsection, the term publicly held corporation means any corporation which is an issuer (as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c))—

(A)

the securities of which are required to be registered under section 12 of such Act (15 U.S.C. 78l), or

(B)

that is required to file reports under section 15(d) of such Act (15 U.S.C. 78o(d)).

.

(2)

Conforming amendment

Section 162(m)(3), as amended by subsection (b), is amended by adding at the end the following flush sentence:

Such term shall include any employee who would be described in subparagraph (B) if the reporting described in such subparagraph were required as so described.

.

(d)

Special rule for remuneration paid to beneficiaries, etc

Paragraph (4) of section 162(m), as amended by subsection (a), is amended by adding at the end the following new subparagraph:

(F)

Special rule for remuneration paid to beneficiaries, etc

Remuneration shall not fail to be applicable employee remuneration merely because it is includible in the income of, or paid to, a person other than the covered employee, including after the death of the covered employee.

.

(e)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2017.

(2)

Exception for binding contracts

The amendments made by this section shall not apply to remuneration which is pursuant to a written binding contract which was in effect on November 2, 2017, and which was not modified in any material respect on or after such date.

13602.

Excise tax on excess tax-exempt organization executive compensation

(a)

In general

Subchapter D of chapter 42 is amended by adding at the end the following new section:

4960.

Tax on excess tax-exempt organization executive compensation

(a)

Tax imposed

There is hereby imposed a tax equal to 20 percent of the sum of—

(1)

so much of the remuneration paid (other than any excess parachute payment) by an applicable tax-exempt organization for the taxable year with respect to employment of any covered employee in excess of $1,000,000, plus

(2)

any excess parachute payment paid by such an organization to any covered employee.

For purposes of the preceding sentence, remuneration shall be treated as paid when there is no substantial risk of forfeiture of the rights to such remuneration.
(b)

Liability for tax

The employer shall be liable for the tax imposed under subsection (a).

(c)

Definitions and special rules

For purposes of this section—

(1)

Applicable tax-exempt organization

The term applicable tax-exempt organization means any organization which for the taxable year—

(A)

is exempt from taxation under section 501(a),

(B)

is a farmers’ cooperative organization described in section 521(b)(1),

(C)

has income excluded from taxation under section 115(1), or

(D)

is a political organization described in section 527(e)(1).

(2)

Covered employee

For purposes of this section, the term covered employee means any employee (including any former employee) of an applicable tax-exempt organization if the employee—

(A)

is one of the 5 highest compensated employees of the organization for the taxable year, or

(B)

was a covered employee of the organization (or any predecessor) for any preceding taxable year beginning after December 31, 2016.

(3)

Remuneration

For purposes of this section, the term remuneration means wages (as defined in section 3401(a)), except that such term shall not include any designated Roth contribution (as defined in section 402A(c)) and shall include amounts required to be included in gross income under section 457(f).

(4)

Remuneration from related organizations

(A)

In general

Remuneration of a covered employee by an applicable tax-exempt organization shall include any remuneration paid with respect to employment of such employee by any related person or governmental entity.

(B)

Related organizations

A person or governmental entity shall be treated as related to an applicable tax-exempt organization if such person or governmental entity—

(i)

controls, or is controlled by, the organization,

(ii)

is controlled by one or more persons which control the organization,

(iii)

is a supported organization (as defined in section 509(f)(3)) during the taxable year with respect to the organization,

(iv)

is a supporting organization described in section 509(a)(3) during the taxable year with respect to the organization, or

(v)

in the case of an organization which is a voluntary employees’ beneficiary association described in section 501(c)(9), establishes, maintains, or makes contributions to such voluntary employees’ beneficiary association.

(C)

Liability for tax

In any case in which remuneration from more than one employer is taken into account under this paragraph in determining the tax imposed by subsection (a), each such employer shall be liable for such tax in an amount which bears the same ratio to the total tax determined under subsection (a) with respect to such remuneration as—

(i)

the amount of remuneration paid by such employer with respect to such employee, bears to

(ii)

the amount of remuneration paid by all such employers to such employee.

(5)

Excess parachute payment

For purposes of determining the tax imposed by subsection (a)(2)—

(A)

In general

The term excess parachute payment means an amount equal to the excess of any parachute payment over the portion of the base amount allocated to such payment.

(B)

Parachute payment

The term parachute payment means any payment in the nature of compensation to (or for the benefit of) a covered employee if—

(i)

such payment is contingent on such employee’s separation from employment with the employer, and

(ii)

the aggregate present value of the payments in the nature of compensation to (or for the benefit of) such individual which are contingent on such separation equals or exceeds an amount equal to 3 times the base amount.

Such term does not include any payment described in section 280G(b)(6) (relating to exemption for payments under qualified plans) or any payment made under or to an annuity contract described in section 403(b) or a plan described in section 457(b).
(C)

Base amount

Rules similar to the rules of 280G(b)(3) shall apply for purposes of determining the base amount.

(D)

Property transfers; present value

Rules similar to the rules of paragraphs (3) and (4) of section 280G(d) shall apply.

(6)

Coordination with deduction limitation

Remuneration the deduction for which is not allowed by reason of section 162(m) shall not be taken into account for purposes of this section.

(d)

Regulations

The Secretary shall prescribe such regulations as may be necessary to prevent avoidance of the tax under this section, including regulations preventing employees from being misclassified as contractors or from being compensated through a pass-through or other entity to avoid such tax.

.

(b)

Clerical amendment

The table of sections for subchapter D of chapter 42 is amended by adding at the end the following new item:

Sec. 4960. Tax on excess tax-exempt organization executive compensation.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13603.

Treatment of qualified equity grants

(a)

In general

Section 83 is amended by adding at the end the following new subsection:

(i)

Qualified equity grants

(1)

In general

For purposes of this subtitle—

(A)

Timing of inclusion

If qualified stock is transferred to a qualified employee who makes an election with respect to such stock under this subsection, subsection (a) shall be applied by including the amount determined under such subsection with respect to such stock in income of the employee in the taxable year determined under subparagraph (B) in lieu of the taxable year described in subsection (a).

(B)

Taxable year determined

The taxable year determined under this subparagraph is the taxable year of the employee which includes the earliest of—

(i)

the first date such qualified stock becomes transferable (including, solely for purposes of this clause, becoming transferable to the employer),

(ii)

the date the employee first becomes an excluded employee,

(iii)

the first date on which any stock of the corporation which issued the qualified stock becomes readily tradable on an established securities market (as determined by the Secretary, but not including any market unless such market is recognized as an established securities market by the Secretary for purposes of a provision of this title other than this subsection),

(iv)

the date that is 5 years after the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, or

(v)

the date on which the employee revokes (at such time and in such manner as the Secretary provides) the election under this subsection with respect to such stock.

(2)

Qualified stock

(A)

In general

For purposes of this subsection, the term qualified stock means, with respect to any qualified employee, any stock in a corporation which is the employer of such employee, if—

(i)

such stock is received—

(I)

in connection with the exercise of an option, or

(II)

in settlement of a restricted stock unit, and

(ii)

such option or restricted stock unit was granted by the corporation—

(I)

in connection with the performance of services as an employee, and

(II)

during a calendar year in which such corporation was an eligible corporation.

(B)

Limitation

The term qualified stock shall not include any stock if the employee may sell such stock to, or otherwise receive cash in lieu of stock from, the corporation at the time that the rights of the employee in such stock first become transferable or not subject to a substantial risk of forfeiture.

(C)

Eligible corporation

For purposes of subparagraph (A)(ii)(II)—

(i)

In general

The term eligible corporation means, with respect to any calendar year, any corporation if—

(I)

no stock of such corporation (or any predecessor of such corporation) is readily tradable on an established securities market (as determined under paragraph (1)(B)(iii)) during any preceding calendar year, and

(II)

such corporation has a written plan under which, in such calendar year, not less than 80 percent of all employees who provide services to such corporation in the United States (or any possession of the United States) are granted stock options, or restricted stock units, with the same rights and privileges to receive qualified stock.

(ii)

Same rights and privileges

For purposes of clause (i)(II)—

(I)

except as provided in subclauses (II) and (III), the determination of rights and privileges with respect to stock shall be made in a similar manner as under section 423(b)(5),

(II)

employees shall not fail to be treated as having the same rights and privileges to receive qualified stock solely because the number of shares available to all employees is not equal in amount, so long as the number of shares available to each employee is more than a de minimis amount, and

(III)

rights and privileges with respect to the exercise of an option shall not be treated as the same as rights and privileges with respect to the settlement of a restricted stock unit.

(iii)

Employee

For purposes of clause (i)(II), the term employee shall not include any employee described in section 4980E(d)(4) or any excluded employee.

(iv)

Special rule for calendar years before 2018

In the case of any calendar year beginning before January 1, 2018, clause (i)(II) shall be applied without regard to whether the rights and privileges with respect to the qualified stock are the same.

(3)

Qualified employee; excluded employee

For purposes of this subsection—

(A)

In general

The term qualified employee means any individual who—

(i)

is not an excluded employee, and

(ii)

agrees in the election made under this subsection to meet such requirements as are determined by the Secretary to be necessary to ensure that the withholding requirements of the corporation under chapter 24 with respect to the qualified stock are met.

(B)

Excluded employee

The term excluded employee means, with respect to any corporation, any individual—

(i)

who was a 1-percent owner (within the meaning of section 416(i)(1)(B)(ii)) at any time during the 10 preceding calendar years,

(ii)

who is or has been at any prior time—

(I)

the chief executive officer of such corporation or an individual acting in such a capacity, or

(II)

the chief financial officer of such corporation or an individual acting in such a capacity,

(iii)

who bears a relationship described in section 318(a)(1) to any individual described in subclause (I) or (II) of clause (ii), or

(iv)

who was for any of the 10 preceding taxable years one of the 4 highest compensated officers of such corporation, determined with respect to each such taxable year on the basis of the shareholder disclosure rules for compensation under the Securities Exchange Act of 1934 (as if such rules applied to such corporation).

(4)

Election

(A)

Time for making election

An election with respect to qualified stock shall be made under this subsection no later than 30 days after the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, and shall be made in a manner similar to the manner in which an election is made under subsection (b).

(B)

Limitations

No election may be made under this section with respect to any qualified stock if—

(i)

the qualified employee has made an election under subsection (b) with respect to such qualified stock,

(ii)

any stock of the corporation which issued the qualified stock is readily tradable on an established securities market (as determined under paragraph (1)(B)(iii)) at any time before the election is made, or

(iii)

such corporation purchased any of its outstanding stock in the calendar year preceding the calendar year which includes the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, unless—

(I)

not less than 25 percent of the total dollar amount of the stock so purchased is deferral stock, and

(II)

the determination of which individuals from whom deferral stock is purchased is made on a reasonable basis.

(C)

Definitions and special rules related to limitation on stock redemptions

(i)

Deferral stock

For purposes of this paragraph, the term deferral stock means stock with respect to which an election is in effect under this subsection.

(ii)

Deferral stock with respect to any individual not taken into account if individual holds deferral stock with longer deferral period

Stock purchased by a corporation from any individual shall not be treated as deferral stock for purposes of subparagraph (B)(iii) if such individual (immediately after such purchase) holds any deferral stock with respect to which an election has been in effect under this subsection for a longer period than the election with respect to the stock so purchased.

(iii)

Purchase of all outstanding deferral stock

The requirements of subclauses (I) and (II) of subparagraph (B)(iii) shall be treated as met if the stock so purchased includes all of the corporation’s outstanding deferral stock.

(iv)

Reporting

Any corporation which has outstanding deferral stock as of the beginning of any calendar year and which purchases any of its outstanding stock during such calendar year shall include on its return of tax for the taxable year in which, or with which, such calendar year ends the total dollar amount of its outstanding stock so purchased during such calendar year and such other information as the Secretary requires for purposes of administering this paragraph.

(5)

Controlled groups

For purposes of this subsection, all persons treated as a single employer under section 414(b) shall be treated as 1 corporation.

(6)

Notice requirement

Any corporation which transfers qualified stock to a qualified employee shall, at the time that (or a reasonable period before) an amount attributable to such stock would (but for this subsection) first be includible in the gross income of such employee—

(A)

certify to such employee that such stock is qualified stock, and

(B)

notify such employee—

(i)

that the employee may be eligible to elect to defer income on such stock under this subsection, and

(ii)

that, if the employee makes such an election—

(I)

the amount of income recognized at the end of the deferral period will be based on the value of the stock at the time at which the rights of the employee in such stock first become transferable or not subject to substantial risk of forfeiture, notwithstanding whether the value of the stock has declined during the deferral period,

(II)

the amount of such income recognized at the end of the deferral period will be subject to withholding under section 3401(i) at the rate determined under section 3402(t), and

(III)

the responsibilities of the employee (as determined by the Secretary under paragraph (3)(A)(ii)) with respect to such withholding.

(7)

Restricted stock units

This section (other than this subsection), including any election under subsection (b), shall not apply to restricted stock units.

.

(b)

Withholding

(1)

Time of withholding

Section 3401 is amended by adding at the end the following new subsection:

(i)

Qualified stock for which an election is in effect under section 83(i)

For purposes of subsection (a), qualified stock (as defined in section 83(i)) with respect to which an election is made under section 83(i) shall be treated as wages—

(1)

received on the earliest date described in section 83(i)(1)(B), and

(2)

in an amount equal to the amount included in income under section 83 for the taxable year which includes such date.

.

(2)

Amount of withholding

Section 3402 is amended by adding at the end the following new subsection:

(t)

Rate of withholding for certain stock

In the case of any qualified stock (as defined in section 83(i)(2)) with respect to which an election is made under section 83(i)—

(1)

the rate of tax under subsection (a) shall not be less than the maximum rate of tax in effect under section 1, and

(2)

such stock shall be treated for purposes of section 3501(b) in the same manner as a non-cash fringe benefit.

.

(c)

Coordination with other deferred compensation rules

(1)

Election to apply deferral to statutory options

(A)

Incentive stock options

Section 422(b) is amended by adding at the end the following: Such term shall not include any option if an election is made under section 83(i) with respect to the stock received in connection with the exercise of such option..

(B)

Employee stock purchase plans

Section 423 is amended—

(i)

by adding at the end of subsection (a) the following flush sentence:

The preceding sentence shall not apply to any share of stock with respect to which an election is made under section 83(i).

, and

(ii)

in subsection (b)(5), by striking and before the plan and by inserting , and the rules of section 83(i) shall apply in determining which employees have a right to make an election under such section before the semicolon at the end.

(2)

Exclusion from definition of nonqualified deferred compensation plan

Subsection (d) of section 409A is amended by adding at the end the following new paragraph:

(7)

Treatment of qualified stock

An arrangement under which an employee may receive qualified stock (as defined in section 83(i)(2)) shall not be treated as a nonqualified deferred compensation plan solely because of an employee’s election, or ability to make an election, to defer recognition of income under section 83(i).

.

(d)

Information reporting

Section 6051(a) is amended by striking and at the end of paragraph (14)(B), by striking the period at the end of paragraph (15) and inserting a comma, and by inserting after paragraph (15) the following new paragraphs:

(16)

the amount includible in gross income under subparagraph (A) of section 83(i)(1) with respect to an event described in subparagraph (B) of such section which occurs in such calendar year, and

(17)

the aggregate amount of income which is being deferred pursuant to elections under section 83(i), determined as of the close of the calendar year.

.

(e)

Penalty for failure of employer To provide notice of tax consequences

Section 6652 is amended by adding at the end the following new subsection:

(p)

Failure To provide notice under section 83(i)

In the case of each failure to provide a notice as required by section 83(i)(6), at the time prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall be paid, on notice and demand of the Secretary and in the same manner as tax, by the person failing to provide such notice, an amount equal to $100 for each such failure, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $50,000.

.

(f)

Effective dates

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to stock attributable to options exercised, or restricted stock units settled, after December 31, 2017.

(2)

Requirement to provide notice

The amendments made by subsection (e) shall apply to failures after December 31, 2017.

(g)

Transition rule

Until such time as the Secretary (or the Secretary’s delegate) issues regulations or other guidance for purposes of implementing the requirements of paragraph (2)(C)(i)(II) of section 83(i) of the Internal Revenue Code of 1986 (as added by this section), or the requirements of paragraph (6) of such section, a corporation shall be treated as being in compliance with such requirements (respectively) if such corporation complies with a reasonable good faith interpretation of such requirements.

13604.

Increase in excise tax rate for stock compensation of insiders in expatriated corporations

(a)

In general

Section 4985(a)(1) is amended by striking section 1(h)(1)(C) and inserting section 1(h)(1)(D).

(b)

Effective date

The amendment made by this section shall apply to corporations first becoming expatriated corporations (as defined in section 4985 of the Internal Revenue Code of 1986) after the date of enactment of this Act.

B

Retirement plans

13611.

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, 2017.

13612.

Modification of rules applicable to length of service award plans

(a)

Maximum deferral amount

Clause (ii) of section 457(e)(11)(B) is amended by striking $3,000 and inserting $6,000.

(b)

Cost of living adjustment

Subparagraph (B) of section 457(e)(11) is amended by adding at the end the following:

(iii)

Cost of living adjustment

In the case of taxable years beginning after December 31, 2017, the Secretary shall adjust the $6,000 amount under clause (ii) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2016, and any increase under this paragraph that is not a multiple of $500 shall be rounded to the next lowest multiple of $500.

.

(c)

Application of limitation on accruals

Subparagraph (B) of section 457(e)(11), as amended by subsection (b), is amended by adding at the end the following:

(iv)

Special rule for application of limitation on accruals for certain plans

In the case of a plan described in subparagraph (A)(ii) which is a defined benefit plan (as defined in section 414(j)), the limitation under clause (ii) shall apply to the actuarial present value of the aggregate amount of length of service awards accruing with respect to any year of service. Such actuarial present value with respect to any year shall be calculated using reasonable actuarial assumptions and methods, assuming payment will be made under the most valuable form of payment under the plan with payment commencing at the later of the earliest age at which unreduced benefits are payable under the plan or the participant’s age at the time of the calculation.

.

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2017.

13613.

Extended rollover period for plan loan offset amounts

(a)

In general

Paragraph (3) of section 402(c) is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph:

(B)

Rollover of certain plan loan offset amounts

(i)

In general

In the case of an eligible rollover distribution of a qualified plan loan offset amount, the requirements of subparagraph (A) shall be treated as met if such transfer occurs on or before the due date (including extensions) for filing the return of tax for the taxable year in which such amount is treated as distributed from a qualified employer plan.

(ii)

Qualified plan loan offset amount

For purposes of this subparagraph, the term qualified plan loan offset amount means a plan loan offset amount which is treated as distributed from a qualified employer plan to a participant or beneficiary solely by reason of—

(I)

the termination of the qualified employer plan, or

(II)

the failure to meet the repayment terms of the loan from such plan because of the severance from employment of the participant.

(iii)

Plan loan offset amount

For purposes of clause (ii), the term plan loan offset amount means the amount by which the participant's accrued benefit under the plan is reduced in order to repay a loan from the plan.

(iv)

Limitation

This subparagraph shall not apply to any plan loan offset amount unless such plan loan offset amount relates to a loan to which section 72(p)(1) does not apply by reason of section 72(p)(2).

(v)

Qualified employer plan

For purposes of this subsection, the term qualified employer plan has the meaning given such term by section 72(p)(4).

.

(b)

Conforming 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 plan loan offset amounts which are treated as distributed in taxable years beginning after December 31, 2017.