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H.R. 1 (115th): An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.


The text of the bill below is as of Nov 28, 2017 (Placed on Calendar in the Senate).

Summary of this bill

Update #4 --- Dec. 17, 2017

House and Senate Republicans have come to an agreement on the tax bill, H.R. 1, which they intend to pass before Congress goes on recess on the 22nd.

Senate Democrats want the final vote to be delayed until Senator-elect Doug Jones (D-AL) has been seated, just as they had waited for Sen. Scott Brown (R-MA) to be seated before the final vote on the Affordable Care Act back in 2010. But the tax bill is likely to passin both chambers before then. Sen. Bob Corker (R-TN), the only Republican to vote no in the previous Senate vote, will support the final bill. Corker ...


II

Calendar No. 266

115th CONGRESS

1st Session

H. R. 1

IN THE SENATE OF THE UNITED STATES

November 27, 2017

Received; read the first time

November 28, 2017

Read the second time and placed on the calendar

AN ACT

To provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.

1.

Short title; etc

(a)

Short title

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

(b)

Amendment of 1986 Code

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

(c)

Table of contents

The table of contents for this Act is as follows:

Sec. 1. Short title; etc.

Title I—Tax reform for individuals

Subtitle A—Simplification and reform of rates, standard deduction, and exemptions

Sec. 1001. Reduction and simplification of individual income tax rates.

Sec. 1002. Enhancement of standard deduction.

Sec. 1003. Repeal of deduction for personal exemptions.

Sec. 1004. Maximum rate on business income of individuals.

Sec. 1005. Conforming amendments related to simplification of individual income tax rates.

Subtitle B—Simplification and reform of family and individual tax credits

Sec. 1101. Enhancement of child tax credit and new family tax credit.

Sec. 1102. Repeal of nonrefundable credits.

Sec. 1103. Refundable credit program integrity.

Sec. 1104. Procedures to reduce improper claims of earned income credit.

Sec. 1105. Certain income disallowed for purposes of the earned income tax credit.

Subtitle C—Simplification and reform of education incentives

Sec. 1201. American opportunity tax credit.

Sec. 1202. Consolidation of education savings rules.

Sec. 1203. Reforms to discharge of certain student loan indebtedness.

Sec. 1204. Repeal of other provisions relating to education.

Sec. 1205. Rollovers between qualified tuition programs and qualified ABLE programs.

Subtitle D—Simplification and reform of deductions

Sec. 1301. Repeal of overall limitation on itemized deductions.

Sec. 1302. Mortgage interest.

Sec. 1303. Repeal of deduction for certain taxes not paid or accrued in a trade or business.

Sec. 1304. Repeal of deduction for personal casualty losses.

Sec. 1305. Limitation on wagering losses.

Sec. 1306. Charitable contributions.

Sec. 1307. Repeal of deduction for tax preparation expenses.

Sec. 1308. Repeal of medical expense deduction.

Sec. 1309. Repeal of deduction for alimony payments.

Sec. 1310. Repeal of deduction for moving expenses.

Sec. 1311. Termination of deduction and exclusions for contributions to medical savings accounts.

Sec. 1312. Denial of deduction for expenses attributable to the trade or business of being an employee.

Subtitle E—Simplification and reform of exclusions and taxable compensation

Sec. 1401. Limitation on exclusion for employer-provided housing.

Sec. 1402. Exclusion of gain from sale of a principal residence.

Sec. 1403. Repeal of exclusion, etc., for employee achievement awards.

Sec. 1404. Sunset of exclusion for dependent care assistance programs.

Sec. 1405. Repeal of exclusion for qualified moving expense reimbursement.

Sec. 1406. Repeal of exclusion for adoption assistance programs.

Subtitle F—Simplification and reform of savings, pensions, retirement

Sec. 1501. Repeal of special rule permitting recharacterization of Roth IRA contributions as traditional IRA contributions.

Sec. 1502. Reduction in minimum age for allowable in-service distributions.

Sec. 1503. Modification of rules governing hardship distributions.

Sec. 1504. Modification of rules relating to hardship withdrawals from cash or deferred arrangements.

Sec. 1505. Extended rollover period for the rollover of plan loan offset amounts in certain cases.

Sec. 1506. Modification of nondiscrimination rules to protect older, longer service participants.

Subtitle G—Estate, gift, and generation-skipping transfer taxes

Sec. 1601. Increase in credit against estate, gift, and generation-skipping transfer tax.

Sec. 1602. Repeal of estate and generation-skipping transfer taxes.

Title II—Alternative Minimum Tax Repeal

Sec. 2001. Repeal of alternative minimum tax.

Title III—Business tax reform

Subtitle A—Tax rates

Sec. 3001. Reduction in corporate tax rate.

Subtitle B—Cost recovery

Sec. 3101. Increased expensing.

Subtitle C—Small business reforms

Sec. 3201. Expansion of section 179 expensing.

Sec. 3202. Small business accounting method reform and simplification.

Sec. 3203. Small business exception from limitation on deduction of business interest.

Sec. 3204. Modification of treatment of S corporation conversions to C corporations.

Subtitle D—Reform of business-related exclusions, deductions, etc.

Sec. 3301. Interest.

Sec. 3302. Modification of net operating loss deduction.

Sec. 3303. Like-kind exchanges of real property.

Sec. 3304. Revision of treatment of contributions to capital.

Sec. 3305. Repeal of deduction for local lobbying expenses.

Sec. 3306. Repeal of deduction for income attributable to domestic production activities.

Sec. 3307. Entertainment, etc. expenses.

Sec. 3308. Unrelated business taxable income increased by amount of certain fringe benefit expenses for which deduction is disallowed.

Sec. 3309. Limitation on deduction for FDIC premiums.

Sec. 3310. Repeal of rollover of publicly traded securities gain into specialized small business investment companies.

Sec. 3311. Certain self-created property not treated as a capital asset.

Sec. 3312. Repeal of special rule for sale or exchange of patents.

Sec. 3313. Repeal of technical termination of partnerships.

Sec. 3314. Recharacterization of certain gains in the case of partnership profits interests held in connection with performance of investment services.

Sec. 3315. Amortization of research and experimental expenditures.

Sec. 3316. Uniform treatment of expenses in contingency fee cases.

Subtitle E—Reform of business credits

Sec. 3401. Repeal of credit for clinical testing expenses for certain drugs for rare diseases or conditions.

Sec. 3402. Repeal of employer-provided child care credit.

Sec. 3403. Repeal of rehabilitation credit.

Sec. 3404. Repeal of work opportunity tax credit.

Sec. 3405. Repeal of deduction for certain unused business credits.

Sec. 3406. Termination of new markets tax credit.

Sec. 3407. Repeal of credit for expenditures to provide access to disabled individuals.

Sec. 3408. Modification of credit for portion of employer social security taxes paid with respect to employee tips.

Subtitle F—Energy credits

Sec. 3501. Modifications to credit for electricity produced from certain renewable resources.

Sec. 3502. Modification of the energy investment tax credit.

Sec. 3503. Extension and phaseout of residential energy efficient property.

Sec. 3504. Repeal of enhanced oil recovery credit.

Sec. 3505. Repeal of credit for producing oil and gas from marginal wells.

Sec. 3506. Modifications of credit for production from advanced nuclear power facilities.

Subtitle G—Bond reforms

Sec. 3601. Termination of private activity bonds.

Sec. 3602. Repeal of advance refunding bonds.

Sec. 3603. Repeal of tax credit bonds.

Sec. 3604. No tax exempt bonds for professional stadiums.

Subtitle H—Insurance

Sec. 3701. Net operating losses of life insurance companies.

Sec. 3702. Repeal of small life insurance company deduction.

Sec. 3703. Surtax on life insurance company taxable income.

Sec. 3704. Adjustment for change in computing reserves.

Sec. 3705. Repeal of special rule for distributions to shareholders from pre-1984 policyholders surplus account.

Sec. 3706. Modification of proration rules for property and casualty insurance companies.

Sec. 3707. Modification of discounting rules for property and casualty insurance companies.

Sec. 3708. Repeal of special estimated tax payments.

Subtitle I—Compensation

Sec. 3801. Modification of limitation on excessive employee remuneration.

Sec. 3802. Excise tax on excess tax-exempt organization executive compensation.

Sec. 3803. Treatment of qualified equity grants.

Title IV—Taxation of foreign income and foreign persons

Subtitle A—Establishment of participation exemption system for taxation of foreign income

Sec. 4001. Deduction for foreign-source portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations.

Sec. 4002. Application of participation exemption to investments in United States property.

Sec. 4003. Limitation on losses with respect to specified 10-percent owned foreign corporations.

Sec. 4004. Treatment of deferred foreign income upon transition to participation exemption system of taxation.

Subtitle B—Modifications related to foreign tax credit system

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

Sec. 4102. Source of income from sales of inventory determined solely on basis of production activities.

Subtitle C—Modification of subpart F provisions

Sec. 4201. Repeal of inclusion based on withdrawal of previously excluded subpart F income from qualified investment.

Sec. 4202. Repeal of treatment of foreign base company oil related income as subpart F income.

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

Sec. 4204. Look-thru rule for related controlled foreign corporations made permanent.

Sec. 4205. Modification of stock attribution rules for determining status as a controlled foreign corporation.

Sec. 4206. Elimination of requirement that corporation must be controlled for 30 days before subpart F inclusions apply.

Subtitle D—Prevention of base erosion

Sec. 4301. Current year inclusion by United States shareholders with foreign high returns.

Sec. 4302. Limitation on deduction of interest by domestic corporations which are members of an international financial reporting group.

Sec. 4303. Excise tax on certain payments from domestic corporations to related foreign corporations; election to treat such payments as effectively connected income.

Subtitle E—Provisions related to possessions of the United States

Sec. 4401. Extension of deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.

Sec. 4402. Extension of temporary increase in limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands.

Sec. 4403. Extension of American Samoa economic development credit.

Subtitle F—Other international reforms

Sec. 4501. Restriction on insurance business exception to passive foreign investment company rules.

Title V—Exempt organizations

Subtitle A—Unrelated Business Income Tax

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

Sec. 5002. Exclusion of research income limited to publicly available research.

Subtitle B—Excise Taxes

Sec. 5101. Simplification of excise tax on private foundation investment income.

Sec. 5102. Private operating foundation requirements relating to operation of art museum.

Sec. 5103. Excise tax based on investment income of private colleges and universities.

Sec. 5104. Exception from private foundation excess business holding tax for independently-operated philanthropic business holdings.

Subtitle C—Requirements for organizations exempt from tax

Sec. 5201. 501(c)(3) organizations permitted to make statements relating to political campaign in ordinary course of activities.

Sec. 5202. Additional reporting requirements for donor advised fund sponsoring organizations.

I

Tax reform for individuals

A

Simplification and reform of rates, standard deduction, and exemptions

1001.

Reduction and simplification of individual income tax rates

(a)

In general

Section 1 is amended by striking subsection (i) and by striking all that precedes subsection (h) and inserting the following:

1.

Tax imposed

(a)

In general

There is hereby imposed on the income of every individual a tax equal to the sum of—

(1)

12 percent bracket

12 percent of so much of the taxable income as does not exceed the 25-percent bracket threshold amount,

(2)

25 percent bracket

25 percent of so much of the taxable income as exceeds the 25-percent bracket threshold amount but does not exceed the 35-percent bracket threshold amount, plus

(3)

35 percent bracket

35 percent of so much of taxable income as exceeds the 35-percent bracket threshold amount but does not exceed the 39.6 percent bracket threshold amount.

(4)

39.6 percent bracket

39.6 percent of so much of taxable income as exceeds the 39.6-percent bracket threshold amount.

(b)

Bracket threshold amounts

For purposes of this section—

(1)

25-percent bracket threshold amount

The term 25-percent bracket threshold amount means—

(A)

in the case of a joint return or surviving spouse, $90,000,

(B)

in the case of an individual who is the head of a household (as defined in section 2(b)), $67,500,

(C)

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 subparagraph (A), and

(D)

in the case of an estate or trust, $2,550.

(2)

35-percent bracket threshold amount

The term 35-percent bracket threshold amount means—

(A)

in the case of a joint return or surviving spouse, $260,000,

(B)

in the case of a married individual filing a separate return, an amount equal to ½ of the amount in effect for the taxable year under subparagraph (A), and

(C)

in the case of any other individual (other than an estate or trust), $200,000, and

(D)

in the case of an estate or trust, $9,150.

(3)

39.6-percent bracket threshold amount

The term 39.6-percent bracket threshold amount means—

(A)

in the case of a joint return or surviving spouse, $1,000,000,

(B)

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 subparagraph (A), and

(C)

in the case of an estate or trust, $12,500.

(c)

Inflation adjustment

(1)

In general

In the case of any taxable year beginning after 2018, each dollar amount in subsections (b) and (e)(3) (other than any amount determined by reference to such a dollar amount) shall be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

the cost-of-living adjustment determined under this subsection for the calendar year in which the taxable year begins by substituting 2017 for 2016 in paragraph (2)(A)(ii).

If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.
(2)

Cost-of-living adjustment

For purposes of this subsection—

(A)

In general

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

(i)

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

(ii)

the normalized CPI for calendar year 2016.

(B)

Special rule for adjustments with a base year after 2016

For purposes of any provision which provides for the substitution of a year after 2016 for 2016 in subparagraph (A)(ii), subparagraph (A) shall be applied by substituting C-CPI-U for normalized CPI in clause (ii).

(3)

Normalized CPI

For purposes of this subsection, the normalized CPI for any calendar year is the product of—

(A)

the CPI for such calendar year, multiplied by

(B)

the C-CPI-U transition multiple.

(4)

C-CPI-U transition multiple

For purposes of this subsection, the term C-CPI-U transition multiple means the amount obtained by dividing—

(A)

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

(B)

the CPI for calendar year 2016.

(5)

C-CPI-U

For purposes of this subsection—

(A)

In general

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

(B)

Determination for calendar year

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

(6)

CPI

For purposes of this subsection—

(A)

In general

The term Consumer Price Index means the last Consumer Price Index for All Urban Consumers published by the Department of Labor. For purposes of the preceding sentence, the revision of the Consumer Price Index which is most consistent with the Consumer Price Index for calendar year 1986 shall be used.

(B)

Determination for calendar year

The CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year.

(d)

Special rules for certain children with unearned income

(1)

In general

In the case of any child to whom this subsection applies for any taxable year—

(A)

the 25-percent bracket threshold amount shall not be more than the taxable income of such child for the taxable year reduced by the net unearned income of such child, and

(B)

the 35-percent bracket threshold amount shall not be more than the sum of—

(i)

the taxable income of such child for the taxable year reduced by the net unearned income of such child, plus

(ii)

the dollar amount in effect under subsection (b)(2)(D) for the taxable year.

(C)

the 39.6-percent bracket threshold amount shall not be more than the sum of—

(i)

the taxable income of such child for the taxable year reduced by the net unearned income of such child, plus

(ii)

the dollar amount in effect under subsection (b)(3)(C).

(2)

Child to whom subsection applies

This subsection shall apply to any child for any taxable year if—

(A)

such child—

(i)

has not attained age 18 before the close of the taxable year, or

(ii)

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

(B)

either parent of such child is alive at the close of the taxable year, and

(C)

such child does not file a joint return for the taxable year.

(3)

Certain children whose earned income does not exceed one-half of individual’s support

A child is described in this paragraph if—

(A)

such child—

(i)

has not attained age 19 before the close of the taxable year, or

(ii)

is a student (within the meaning of section 7706(f)(2)) who has not attained age 24 before the close of the taxable year, and

(B)

such child’s earned income (as defined in section 911(d)(2)) for such taxable year does not exceed one-half of the amount of the individual’s support (within the meaning of section 7706(c)(1)(D) after the application of section 7706(f)(5) (without regard to subparagraph (A) thereof)) for such taxable year.

(4)

Net unearned income

For purposes of this subsection—

(A)

In general

The term net unearned income means the excess of—

(i)

the portion of the adjusted gross income for the taxable year which is not attributable to earned income (as defined in section 911(d)(2)), over

(ii)

the sum of—

(I)

the amount in effect for the taxable year under section 63(c)(2)(A) (relating to limitation on standard deduction in the case of certain dependents), plus

(II)

The greater of the amount described in subclause (I) or, if the child itemizes his deductions for the taxable year, the amount of the itemized deductions allowed by this chapter for the taxable year which are directly connected with the production of the portion of adjusted gross income referred to in clause (i).

(B)

Limitation based on taxable income

The amount of the net unearned income for any taxable year shall not exceed the individual’s taxable income for such taxable year.

(e)

Phaseout of 12-percent rate

(1)

In general

The amount of tax imposed by this section (determined without regard to this subsection) shall be increased by 6 percent of the excess (if any) of—

(A)

adjusted gross income, over

(B)

the applicable dollar amount.

(2)

Limitation

The increase determined under paragraph (1) with respect to any taxpayer for any taxable year shall not exceed 27.6 percent of the lesser of—

(A)

the taxpayer’s taxable income for such taxable year, or

(B)

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

(3)

Applicable dollar amount

For purposes of this subsection, the term applicable dollar amount means—

(A)

in the case of a joint return or a surviving spouse, $1,200,000,

(B)

in the case of a married individual filing a separate return, an amount equal to 1/2 of the amount in effect for the taxable year under subparagraph (A), and

(C)

in the case of any other individual, $1,000,000.

(4)

Estates and trusts

Paragraph (1) shall not apply in the case of an estate or trust.

.

(b)

Application of current income tax brackets to capital gains brackets

(1)

In general

(A)

0-percent capital gains bracket

Section 1(h)(1) is amended by striking which would (without regard to this paragraph) be taxed at a rate below 25 percent in subparagraph (B)(i) and inserting below the 15-percent rate threshold.

(B)

15-percent capital gains bracket

Section 1(h)(1)(C)(ii)(I) is amended by striking which would (without regard to this paragraph) be taxed at a rate below 39.6 percent and inserting below the 20-percent rate threshold.

(2)

Rate thresholds defined

Section 1(h) is amended by adding at the end the following new paragraph:

(12)

Rate thresholds defined

For purposes of this subsection—

(A)

15-percent rate threshold

The 15-percent rate threshold shall be—

(i)

in the case of a joint return or surviving spouse, $77,200 (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)), $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 clause (i), and

(iv)

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

(B)

20-percent rate threshold

The 20-percent rate threshold 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 subparagraphs (A) and (B) shall be increased by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under subsection (c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 2017 for calendar year 2016 in clause (ii) thereof.

.

(c)

Application of section 15

(1)

In general

Subsection (a) of section 15 is amended by striking by this chapter and inserting by section 11 (or by reference to any such rates).

(2)

Conforming amendments

(A)

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

(B)

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

(C)

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

(3)

Application to this Act

Section 15 of the Internal Revenue Code of 1986 shall not apply to any change in a rate of tax imposed by chapter 1 of such Code which occurs by reason of any amendment made by this Act (other than the amendments made by section 3001).

(d)

Effective date

(1)

In general

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

(2)

Subsection (c)

The amendments made by subsection (c) shall take effect on the date of the enactment of this Act.

1002.

Enhancement of standard deduction

(a)

Increase in standard deduction

Section 63(c) is amended to read as follows:

(c)

Standard deduction

For purposes of this subtitle—

(1)

In general

Except as otherwise provided in this subsection, the term standard deduction means—

(A)

$24,400, in the case of a joint return (or a surviving spouse (as defined in section 2(a)),

(B)

three-quarters of the amount in effect under subparagraph (A) for the taxable year, in the case of the head of a household (as defined in section 2(b)), and

(C)

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

(2)

Limitation on standard deduction in the case of certain dependents

In the case of an individual who is a dependent of another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, the standard deduction applicable to such individual for such individual’s taxable year shall not exceed the greater of—

(A)

$500, or

(B)

the sum of $250 and such individual’s earned income (within the means of section 32).

(3)

Certain individuals, etc., not eligible for standard deduction

In the case of—

(A)

a married individual filing a separate return where either spouse itemizes deductions,

(B)

a nonresident alien individual,

(C)

an individual making a return under section 443(a)(1) for a period of less than 12 months on account of a change in his annual accounting period, or

(D)

an estate or trust, common trust fund, or partnership,

the standard deduction shall be zero.
(4)

Unmarried individual

For purposes of this section, the term unmarried individual means any individual who—

(A)

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

(B)

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

(C)

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

(5)

Inflation adjustments

(A)

Standard deduction amount

In the case of any taxable year beginning after 2019, the dollar amount in paragraph (1)(A) shall be increased by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 2018 for calendar year 2016 in clause (ii) thereof.

(B)

Limitation amount in case of certain dependents

In the case of any taxable year beginning after 2017, each of the dollar amounts in paragraph (2) shall be increased by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)
(I)

in the case of the dollar amount in paragraph (2)(A), under section 1(c)(2)(A) for the calendar year in which the taxable year begins determined by substituting calendar year 1987 for calendar year 2016 in clause (ii) thereof, and

(II)

in the case of the dollar amount in paragraph (2)(B), under section 1(c)(2)(A) for the calendar year in which the taxable year begins determined by substituting calendar year 1997 for calendar year 2016 in clause (ii) thereof.

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

.

(b)

Conforming amendments

(1)

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

(2)

Section 63 is amended by striking subsections (f) and (g).

(3)

Section 1398(c) is amended—

(A)

by striking Basic in the heading thereof,

(B)

by striking Basic standard in the heading of paragraph (3) and inserting Standard, and

(C)

by striking basic in paragraph (3).

(4)

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

(5)

Section 6014(b)(4) is amended by striking section 63(c)(5) and inserting section 63(c)(2).

(c)

Effective date

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

1003.

Repeal of deduction for personal exemptions

(a)

In general

Part V of subchapter B of chapter 1 is hereby repealed.

(b)

Definition of dependent retained

Section 152, prior to repeal by subsection (a), is hereby redesignated as section 7706 and moved to the end of chapter 79.

(c)

Application to estates and trusts

Subsection (b) of section 642 is amended—

(1)

by striking paragraph (2)(C),

(2)

by striking paragraph (3), and

(3)

by striking Deduction for personal exemption in the heading thereof and inserting Basic deduction.

(d)

Application to nonresident aliens

Section 873(b) is amended by striking paragraph (3).

(e)

Modification of wage withholding rules

(1)

In general

Section 3402(a) is amended by striking paragraph (2).

(2)

Conforming amendment

Section 3402(a) is amended—

(A)

by redesignating subparagraphs (A) and (B) of paragraph (1) as paragraphs (1) and (2) and moving such redesignated paragraphs 2 ems to the left, and

(B)

by striking all that precedes otherwise provided in this section and inserting the following:

(a)

Requirement of withholding

Except as

.

(3)

Number of exemptions

Section 3402(f)(1) is amended—

(A)

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

(B)

in subparagraph (C), by striking with respect to whom, on the basis of facts existing at the beginning of such day, there may reasonably be expected to be allowable an exemption under section 151(c) and inserting who, on the basis of facts existing at the beginning of such day, is reasonably expected to be a dependent of the employee.

(f)

Modification of return requirement

(1)

In general

Paragraph (1) of section 6012(a) is amended to read as follows:

(1)

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

(A)

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

(B)

an individual entitled to make a joint return if—

(i)

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

(ii)

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

(iii)

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

(iv)

neither such individual nor such individual’s spouse is an individual described in section 63(c)(2) who has income (other than earned income) in excess of the amount in effect under section 63(c)(2)(A).

.

(2)

Bankruptcy estates

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

(g)

Conforming amendments

(1)

Section 2(a)(1)(B) is amended by striking a dependent and all that follows through section 151 and inserting a dependent who (within the meaning of section 7706, determined without regard to subsections (b)(1), (b)(2) and (d)(1)(B) thereof) is a son, stepson, daughter, or stepdaughter of the taxpayer.

(2)

Section 36B(b)(2)(A) is amended by striking section 152 and inserting section 7706.

(3)

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

(4)

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

(5)

Section 36B(d)(1) is amended by striking equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year and inserting the sum of 1 (2 in the case of a joint return) plus the number of the taxpayer’s dependents for the taxable year.

(6)

Section 36B(e)(1) is amended by striking 1 or more individuals for whom a taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year (including the taxpayer or his spouse) and inserting 1 or more of the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer.

(7)

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

(A)

by striking section 152 and inserting section 7706, and

(B)

by striking the period at the end and inserting a comma.

(8)

Section 72(t)(2)(D)(i)(III) is amended by striking section 152 and inserting section 7706.

(9)

Section 72(t)(7)(A)(iii) is amended by striking section 152(f)(1) and inserting section 7706(f)(1).

(10)

Section 105(b) is amended—

(A)

by striking as defined in section 152 and inserting as defined in section 7706,

(B)

by striking section 152(f)(1) and inserting section 7706(f)(1) and

(C)

by striking section 152(e) and inserting section 7706(e).

(11)

Section 105(c)(1) is amended by striking section 152 and inserting section 7706.

(12)

Section 125(e)(1)(D) is amended by striking section 152 and inserting section 7706.

(13)

Section 132(h)(2)(B) is amended—

(A)

by striking section 152(f)(1) and inserting section 7706(f)(1), and

(B)

by striking section 152(e) and inserting section 7706(e).

(14)

Section 139D(c)(5) is amended by striking section 152 and inserting section 7706.

(15)

Section 162(l)(1)(D) is amended by striking section 152(f)(1) and inserting section 7706(f)(1).

(16)

Section 170(g)(1) is amended by striking section 152 and inserting section 7706.

(17)

Section 170(g)(3) is amended by striking section 152(d)(2) and inserting section 7706(d)(2).

(18)

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

(19)

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

(20)

Section 220(d)(2)(A) is amended by striking section 152 and inserting section 7706.

(21)

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

(22)

Section 223(d)(2)(A) is amended by striking section 152 and inserting section 7706.

(23)

Section 401(h) is amended by striking section 152(f)(1) in the last sentence and inserting section 7706(f)(1).

(24)

Section 402(l)(4)(D) is amended by striking section 152 and inserting section 7706.

(25)

Section 409A(a)(2)(B)(ii)(I) is amended by striking section 152(a) and inserting section 7706(a).

(26)

Section 501(c)(9) is amended by striking section 152(f)(1) and inserting section 7706(f)(1).

(27)

Section 529(e)(2)(B) is amended by striking section 152(d)(2) and inserting section 7706(d)(2).

(28)

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

(29)

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

(30)

Section 891 is amended by striking under section 151 and.

(31)

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

(32)

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

(33)

Section 933 is amended—

(A)

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

(B)

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

(34)

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

(ii)

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

.

(35)

Section 1361(c)(1)(C) is amended by striking section 152(f)(1)(C) and inserting section 7706(f)(1)(C).

(36)

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

(37)

Section 2032A(c)(7)(D) is amended by striking section 152(f)(2) and inserting section 7706(f)(2).

(38)

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

(39)

Section 3402(r)(2) is amended by striking the sum of— and all that follows and inserting the standard deduction in effect under section 63(c)(1)(B)..

(40)

Section 5000A(b)(3)(A) is amended by striking section 152 and inserting section 7706.

(41)

Section 5000A(c)(4)(A) is amended by striking the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year and inserting the sum of 1 (2 in the case of a joint return) plus the number of the taxpayer’s dependents for the taxable year.

(42)

Section 6013(b)(3)(A) is amended—

(A)

by striking had less than the exemption amount of gross income in clause (ii) and inserting had no gross income,

(B)

by striking had gross income of the exemption amount or more in clause (iii) and inserting had any gross income, and

(C)

by striking the flush language following clause (iii).

(43)

Section 6103(l)(21)(A)(iii) is amended to read as follows:

(iii)

the number of the taxpayer’s dependents,

.

(44)

Section 6213(g)(2) is amended by striking subparagraph (H).

(45)

Section 6334(d)(2) is amended to read as follows:

(2)

Exempt amount

(A)

In general

For purposes of paragraph (1), the term exempt amount means an amount equal to—

(i)

the standard deduction, divided by

(ii)

52.

(B)

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.

.

(46)

Section 7702B(f)(2)(C)(iii) is amended by striking section 152(d)(2) and inserting section 7706(d)(2).

(47)

Section 7703(a) is amended by striking part V of subchapter B of chapter 1 and.

(48)

Section 7703(b)(1) is amended by striking section 152(f)(1) and all that follows and inserting section 7706(f)(1),.

(49)

Section 7706(a), as redesignated by this section, is amended by striking this subtitle and inserting subtitle A.

(50)
(A)

Section 7706(d)(1)(B), as redesignated by this section, is amended by striking the exemption amount (as defined in section 151(d)) and inserting $4,150.

(B)

Section 7706(d), as redesignated by this section, is amended by adding at the end the following new paragraph:

(6)

Inflation adjustment

In the case of any calendar year beginning after 2018, the $4,150 amount in paragraph (1)(B) shall be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting calendar year 2017 for calendar year 2016 in clause (ii) thereof.

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

.

(51)

The table of sections for chapter 79 is amended by adding at the end the following new item:

Sec. 7706. Dependent defined.

.

(h)

Effective date

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

1004.

Maximum rate on business income of individuals

(a)

In general

Part I of subchapter A of chapter 1 is amended by inserting after section 3 the following new section:

4.

25 percent maximum rate on business income of individuals

(a)

Reduction in tax to achieve 25 percent maximum rate

The tax imposed by section 1 shall be reduced by the sum of—

(1)

10 percent of the lesser of—

(A)

qualified business income, or

(B)

the excess (if any) of—

(i)

taxable income reduced by net capital gain (as defined in section 1(h)(11)(A)), over

(ii)

the maximum dollar amount for the 25-percent rate bracket which applies to the taxpayer under section 1 for the taxable year, and

(2)

4.6 percent of the excess (if any) of—

(A)

the lesser of—

(i)

qualified business income, or

(ii)

the excess (if any) determined under paragraph (1)(B), over

(B)

the excess of—

(i)

the maximum dollar amount for the 35-percent rate bracket which applies to the taxpayer under section 1 for the taxable year, over

(ii)

the maximum dollar amount for the 25-percent rate bracket which applies to the taxpayer under section 1 for the taxable year.

(b)

Qualified business income

For purposes of this section, the term qualified business income means the excess (if any) of—

(1)

the sum of—

(A)

100 percent of any net business income derived from any passive business activity, plus

(B)

the capital percentage of any net business income derived from any active business activity, over

(2)

the sum of—

(A)

100 percent of any net business loss derived from any passive business activity,

(B)

except as provided in subsection (e)(3)(A), 30 percent of any net business loss derived from any active business activity, plus

(C)

any carryover business loss determined for the preceding taxable year.

(c)

Determination of net business income or loss

For purposes of this section—

(1)

In general

Net business income or loss shall be determined with respect to any business activity by appropriately netting items of income, gain, deduction, and loss with respect to such business activity.

(2)

Wages, etc

Any wages (as defined in section 3401), payments described in subsection (a) or (c) of section 707, or directors’ fees received by the taxpayer which are properly attributable to any business activity shall be taken into account under paragraph (1) as an item of income with respect to such business activity.

(3)

Exception for certain investment-related items

There shall not be taken into account under paragraph (1)—

(A)

any item of short-term capital gain, short-term capital loss, long-term capital gain, or long-term capital loss,

(B)

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

(C)

any interest income other than interest income which is properly allocable to a trade or business,

(D)

any item of gain or loss described in subparagraph (C) or (D) of section 954(c)(1) (applied by substituting business activity for controlled foreign corporation),

(E)

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)),

(F)

any amount received from an annuity which is not received in connection with the trade or business of the business activity, and

(G)

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

(4)

Application of restrictions applicable to determining taxable income

Net business income or loss shall be appropriately adjusted so as only to take into account any amount of income, gain, deduction, or loss to the extent such amount affects the determination of taxable income for the taxable year.

(5)

Carryover business loss

For purposes of subsection (b)(2)(C), the carryover business loss determined for any taxable year is the excess (if any) of the sum described in subsection (b)(2) over the sum described in subsection (b)(1) for such taxable year.

(d)

Passive and active business activity

For purposes of this section—

(1)

Passive business activity

The term passive business activity means any passive activity as defined in section 469(c) determined without regard to paragraphs (3) and (6)(B) thereof.

(2)

Active business activity

The term active business activity means any business activity which is not a passive business activity.

(3)

Business activity

The term business activity means any activity (within the meaning of section 469) which involves the conduct of any trade or business.

(e)

Capital percentage

For purposes of this section—

(1)

In general

Except as otherwise provided in this section, the term capital percentage means 30 percent.

(2)

Increased percentage for capital-intensive business activities

In the case of a taxpayer who elects the application of this paragraph with respect to any active business activity (other than a specified service activity), the capital percentage shall be equal to the applicable percentage (as defined in subsection (f)) for each taxable year with respect to which such election applies. Any election made under this paragraph shall apply to the taxable year for which such election is made and each of the 4 subsequent taxable years. Such election shall be made not later than the due date (including extensions) for the return of tax for the taxable year for which such election is made, and, once made, may not be revoked.

(3)

Treatment of specified service activities

(A)

In general

In the case of any active business activity which is a specified service activity—

(i)

the capital percentage shall be 0 percent, and

(ii)

subsection (b)(2)(B) shall be applied by substituting 0 percent for 30 percent.

(B)

Exception for capital-intensive specified service activities

If—

(i)

the taxpayer elects the application of this subparagraph with respect to such activity for any taxable year, and

(ii)

the applicable percentage (as defined in subsection (f)) with respect to such activity for such taxable year is at least 10 percent,

then subparagraph (A) shall not apply and the capital percentage with respect to such activity shall be equal to such applicable percentage.
(C)

Specified service activity

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

(4)

Reduction in capital percentage in certain cases

The capital percentage (determined after the application of paragraphs (2) and (3)) with respect to any active business activity shall not exceed 1 minus the quotient (not greater than 1) of—

(A)

any amounts described in subsection (c)(2) which are taken into account in determining the net business income derived from such activity, divided by

(B)

such net business income.

(f)

Applicable percentage

For purposes of this section—

(1)

In general

The term applicable percentage means, with respect to any active business activity for any taxable year, the quotient (not greater than 1) of—

(A)

the specified return on capital with respect to such activity for such taxable year, divided by

(B)

the taxpayer’s net business income derived from such activity for such taxable year.

(2)

Specified return on capital

The term specified return on capital means, with respect to any active business activity referred to in paragraph (1), the excess of—

(A)

the product of—

(i)

the deemed rate of return for the taxable year, multiplied by

(ii)

the asset balance with respect to such activity for such taxable year, over

(B)

an amount equal to the interest which is paid or accrued, and for which a deduction is allowed under this chapter, with respect to such activity for such taxable year.

(3)

Deemed rate of return

The term deemed rate of return means, with respect to any taxable year, the Federal short-term rate (determined under section 1274(d) for the month in which or with which such taxable year ends) plus 7 percentage points.

(4)

Asset balance

(A)

In general

The asset balance with respect to any active business activity referred to in paragraph (1) for any taxable year equals the taxpayer’s adjusted basis of any property described in section 1221(a)(2) which is used in connection with such activity as of the end of the taxable year (determined without regard to sections 168(k) and 179).

(B)

Application to activities carried on through partnerships and S corporations

In the case of any active business activity carried on through a partnership or S corporation, the taxpayer shall take into account such taxpayer’s distributive or pro rata share (as the case may be) of the asset balance with respect to such activity as determined with respect to such partnership or S corporation under subparagraph (A) (applied by substituting the partnership’s or S corporation’s adjusted basis for the taxpayer’s adjusted basis).

(g)

Reduced rate for small businesses with net active business income

(1)

In general

The tax imposed by section 1 shall be reduced by 3 percent of the excess (if any) of—

(A)

the least of—

(i)

qualified active business income,

(ii)

taxable income reduced by net capital gain (as defined in section 1(h)(11)(A)), or

(iii)

the 9-percent bracket threshold amount, over

(B)

the excess (if any) of taxable income over the applicable threshold amount.

(2)

Phase-in of rate reduction

In the case of any taxable year beginning before January 1, 2022, paragraph (1) shall be applied by substituting for 3 percent

(A)

in the case of any taxable year beginning after December 31, 2017, and before January 1, 2020, 1 percent, and

(B)

in the case of any taxable year beginning after December 31, 2019, and before January 1, 2022, 2 percent.

(3)

Qualified active business income

For purposes of this subsection, the term qualified active business income means the excess (if any) of—

(A)

any net business income derived from any active business activity, over

(B)

any net business loss derived from any active business activity.

(4)

9-percent bracket threshold amount

For purposes of this subsection, the term 9-percent bracket threshold amount means—

(A)

in the case of a joint return or surviving spouse, $75,000,

(B)

in the case of an individual who is the head of a household (as defined in section 2(b)), 3/4 of the amount in effect for the taxable year under subparagraph (A), and

(C)

in the case of any other individual, 1/2 of the amount in effect for the taxable year under subparagraph (A).

(5)

Applicable threshold amount

For purposes of this subsection, the term applicable threshold amount means—

(A)

in the case of a joint return or surviving spouse, $150,000,

(B)

in the case of an individual who is the head of a household (as defined in section 2(b)), 3/4 of the amount in effect for the taxable year under subparagraph (A), and

(C)

in the case of any other individual, 1/2 of the amount in effect for the taxable year under subparagraph (A).

(6)

Estates and trusts

Paragraph (1) shall not apply to any estate or trust.

(7)

Inflation adjustment

In the case of any taxable year beginning after 2018, the dollar amounts in paragraphs (4)(A) and (5)(A) shall each be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

the cost-of-living adjustment determined under subsection (c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 2017 for calendar year 2016 in clause (ii) thereof.

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

Regulations

The Secretary may issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance—

(1)

which ensures that no amount is taken into account under subsection (f)(4) with respect to more than one activity, and

(2)

which treats all specified service activities of the taxpayer as a single business activity for purposes of this section to the extent that such activities would be treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414.

(i)

References

Any reference in this title to section 1 shall be treated as including a reference to this section unless the context of such reference clearly indicates otherwise.

.

(b)

25 percent rate for certain dividends of real estate investment trusts and cooperatives

Section 1(h), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:

(13)

25 percent rate for certain dividends of real estate investment trusts and cooperatives

(A)

In general

For purposes of this subsection, net capital gain (as defined in paragraph (11)) and unrecaptured section 1250 gain (as defined in paragraph (6)) shall each be increased by specified dividend income.

(B)

Specified dividend income

For purposes of this paragraph, the term specified dividend income means—

(i)

in the case of any dividend received from a real estate investment trust, the portion of such dividend which is neither—

(I)

a capital gain dividend (as defined in section 852(b)(3)), nor

(II)

taken into account in determining qualified dividend income (as defined in paragraph (11)), and

(ii)

any dividend which is includible in gross income and which is received from an organization or corporation described in section 501(c)(12) or 1381(a).

.

(c)

Clerical amendment

The table of sections for part I of subchapter A of chapter 1 is amended by inserting after the item relating to section 3 the following new item:

Sec. 4. 25 percent maximum rate on business income of individuals.

.

(d)

Effective date

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

(e)

Transition rule

In the case of any taxable year which includes December 31, 2017, the amendment made by subsection (a) shall apply with respect to such taxable year adjusted—

(1)

so as to apply with respect to the rates of tax in effect under section 1 of the Internal Revenue Code of 1986 with respect to such taxable year (and so as to achieve a 25 percent effective rate of tax on the business income (determined without regard to paragraph (2)) in the same manner as such amendment applies to taxable years beginning after such date with respect to the rates of tax in effect for such years), and

(2)

by reducing the amount of the reduction in tax (as otherwise determined under paragraph (1)) by the amount which bears the same proportion to the amount of such reduction as the number of days in the taxable year which are before January 1, 2018, bears to the number of days in the entire taxable year.

1005.

Conforming amendments related to simplification of individual income tax rates

(a)

Amendments related to modification of inflation adjustment

(1)

Section 32(b)(2)(B)(ii)(II) is amended by striking section 1(f)(3) for the calendar year in which the taxable year begins determined by substituting calendar year 2008 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for the calendar year in which the taxable year begins determined by substituting calendar year 2008 for calendar year 2016 in clause (ii) thereof.

(2)

Section 32(j)(1)(B) is amended—

(A)

in the matter preceding clause (i), by striking section 1(f)(3) and inserting section 1(c)(2)(A),

(B)

in clause (i), by striking for calendar year 1992 in subparagraph (B) thereof and inserting for calendar year 2016 in clause (ii) thereof, and

(C)

in clause (ii), by striking for calendar year 1992 in subparagraph (B) of such section 1 and inserting for calendar year 2016 in clause (ii) thereof.

(3)

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

(4)

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

(C)

Cost-of-living adjustment defined

(i)

In general

The cost-of-living adjustment for any calendar year is the cost-of-living adjustment for such calendar year determined under section 1(c)(2)(A), by substituting calendar year 1987 for calendar year 2016 in clause (ii) thereof.

(ii)

Special rule where base period ends in a calendar year other than 1983 or 1984

If the base period of any taxpayer does not end in 1983 or 1984, clause (i) shall be applied by substituting the calendar year in which such base period ends for 1987.

.

(5)

Section 42(e)(3)(D)(ii) is amended by striking section 1(f)(3) for such calendar year by substituting calendar year 2008 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for such calendar year by substituting calendar year 2008 for calendar year 2016 in clause (ii) thereof.

(6)

Section 42(h)(3)(H)(i)(II) is amended by striking section 1(f)(3) for such calendar year by substituting calendar year 2001 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for such calendar year by substituting calendar year 2001 for calendar year 2016 in clause (ii) thereof.

(7)

Section 45R(d)(3)(B)(ii) is amended by striking section 1(f)(3) for the calendar year, determined by substituting calendar year 2012 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for such calendar year, determined by substituting calendar year 2012 for calendar year 2016 in clause (ii) thereof.

(8)

Section 125(i)(2) is amended—

(A)

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

(B)

by striking $50 both places it appears in the last sentence and inserting $100.

(9)

Section 162(o)(3) is amended by inserting as in effect before enactment of the Tax Cuts and Jobs Act after section 1(f)(5).

(10)

Section 220(g)(2) is amended by striking section 1(f)(3) for the calendar year in which the taxable year begins by substituting calendar year 1997 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 1997 for calendar year 2016 in clause (ii) thereof.

(11)

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

(B)

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

(i)

by substituting for calendar year 2016 in clause (ii) thereof—

(I)

except as provided in clause (ii), calendar year 1997, and

(II)

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

(ii)

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

The Secretary shall publish the dollar amounts as adjusted under this subsection for taxable years beginning in any calendar year no later than June 1 of the preceding calendar year.

.

(12)

Section 430(c)(7)(D)(vii)(II) is amended by striking section 1(f)(3) for the calendar year, determined by substituting calendar year 2009 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for the calendar year, determined by substituting calendar year 2009 for calendar year 2016 in clause (ii) thereof.

(13)

Section 512(d)(2)(B) is amended by striking section 1(f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 1994 for calendar year 1992 in subparagraph (B) thereofand inserting section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 1994 for calendar year 2016 in clause (ii) thereof.

(14)

Section 513(h)(2)(C)(ii) is amended by striking section 1(f)(3) for the calendar year in which the taxable year begins by substituting calendar year 1987 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 1987 for calendar year 2016 in clause (ii) thereof.

(15)

Section 831(b)(2)(D)(ii) is amended by striking section 1(f)(3) for such calendar year by substituting calendar year 2013 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for such calendar year by substituting calendar year 2013 for calendar year 2016 in clause (ii) thereof.

(16)

Section 877A(a)(3)(B)(i)(II) is amended by striking section 1(f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 2007 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 2007 for calendar year 2016 in clause (ii) thereof.

(17)

Section 911(b)(2)(D)(ii)(II) is amended by striking section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2004 for 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 2004 for calendar year 2016 in clause (ii) thereof.

(18)

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

(2)

Inflation adjustment

(A)

In general

In the case of any debt instrument arising out of a sale or exchange during any calendar year after 2018, each adjusted dollar amount shall be increased by an amount equal to—

(i)

such adjusted dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting calendar year 2017 for calendar year 2016 in clause (ii) thereof.

(B)

Adjusted dollar amounts

For purposes of this paragraph, the term adjusted dollar amount means the dollar amounts in subsections (b) and (c), in each case as in effect for calendar year 2018.

(C)

Rounding

Any increase under subparagraph (A) shall be rounded to the nearest multiple of $100.

.

(19)

Section 2010(c)(3)(B)(ii) is amended by striking section 1(f)(3) for such calendar year by substituting calendar year 2010 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for such calendar year, determined by substituting calendar year 2010 for calendar year 2016 in clause (ii) thereof.

(20)

Section 2032A(a)(3)(B) is amended by striking section 1(f)(3) for such calendar year by substituting calendar year 1997 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for such calendar year, determined by substituting calendar year 1997 for calendar year 2016 in clause (ii) thereof.

(21)

Section 2503(b)(2)(B) is amended by striking section 1(f)(3) for such calendar year by substituting calendar year 1997 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for the calendar year, determined by substituting calendar year 1997 for calendar year 2016 in clause (ii) thereof.

(22)

Section 4161(b)(2)(C)(i)(II) is amended by striking section 1(f)(3) for such calendar year, determined by substituting 2004 for 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for such calendar year, determined by substituting calendar year 2004 for calendar year 2016 in clause (ii) thereof.

(23)

Section 4261(e)(4)(A)(ii) is amended by striking section 1(f)(3) for such calendar year by substituting the year before the last nonindexed year for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for such calendar year, determined by substituting the year before the last nonindexed year for calendar year 2016 in clause (ii) thereof.

(24)

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

(A)

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

(B)

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

(C)

by striking 1992 and inserting 2016.

(25)

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

(A)

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

(B)

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

(C)

by striking 1992 and inserting 2016.

(26)

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

(27)

Section 6323(i)(4)(B) is amended by striking section 1(f)(3) for the calendar year, determined by substituting calendar year 1996 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for the calendar year, determined by substituting calendar year 1996 for calendar year 2016 in clause (ii) thereof.

(28)

Section 6334(g)(1)(B) is amended by striking section 1(f)(3) for such calendar year, by substituting calendar year 1998 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for such calendar year, determined by substituting calendar year 1999 for calendar year 2016 in clause (ii) thereof.

(29)

Section 6601(j)(3)(B) is amended by striking section 1(f)(3) for such calendar year by substituting calendar year 1997 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for such calendar year by substituting calendar year 1997 for calendar year 2016 in clause (ii) thereof.

(30)

Section 6651(i)(1) is amended by striking section 1(f)(3) determined by substituting calendar year 2013 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) determined by substituting calendar year 2013 for calendar year 2016 in clause (ii) thereof.

(31)

Section 6721(f)(1) is amended—

(A)

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

(B)

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

(C)

by striking 1992 and inserting 2016.

(32)

Section 6722(f)(1) is amended—

(A)

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

(B)

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

(C)

by striking 1992 and inserting 2016.

(33)

Section 6652(c)(7)(A) is amended by striking section 1(f)(3) determined by substituting calendar year 2013 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) determined by substituting calendar year 2013 for calendar year 2016 in clause (ii) thereof .

(34)

Section 6695(h)(1) is amended by striking section 1(f)(3) determined by substituting calendar year 2013 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) determined by substituting calendar year 2013 for calendar year 2016 in clause (ii) thereof.

(35)

Section 6698(e)(1) is amended by striking section 1(f)(3) determined by substituting calendar year 2013 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) determined by substituting calendar year 2013 for calendar year 2016 in clause (ii) thereof.

(36)

Section 6699(e)(1) is amended by striking section 1(f)(3) determined by substituting calendar year 2013 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) determined by substituting calendar year 2013 for calendar year 2016 in clause (ii) thereof.

(37)

Section 7345(f)(2) is amended by striking section 1(f)(3) for the calendar year, determined by substituting calendar year 2015 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for the calendar year, determined by substituting calendar year 2015 for calendar year 2016 in clause (ii) thereof.

(38)

Section 7430(c)(1) is amended by striking section 1(f)(3) for such calendar year, by substituting calendar year 1995 for calendar year 1992 in subparagraph (B) thereof in the flush text at the end and inserting section 1(c)(2)(A) for such calendar year, determined by substituting calendar year 1995 for calendar year 2016 in clause (ii) thereof.

(39)

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

(5)

Inflation adjustment

(A)

In general

In the case of any loan made during any calendar year after 2018 to which paragraph (1) applies, the adjusted dollar amount shall be increased by an amount equal to—

(i)

such adjusted dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting calendar year 2017 for calendar year 2016 in clause (ii) thereof.

(B)

Adjusted dollar amount

For purposes of this paragraph, the term adjusted dollar amount means the dollar amount in paragraph (2) as in effect for calendar year 2018.

(C)

Rounding

Any increase under subparagraph (A) shall be rounded to the nearest multiple of $100.

.

(40)

Section 219(b)(5)(C)(i)(II) is amended by striking section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2007 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 2007 for calendar year 2016 in clause (ii) thereof.

(41)

Section 219(g)(8)(B) is amended by striking section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2005 for calendar year 1992 in subparagraph (B) thereof and inserting section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 2005 for calendar year 2016 in clause (ii) thereof.

(b)

Other conforming amendments

(1)

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

(aa)

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

.

(2)

Section 486B(b)(1) is amended—

(A)

by striking maximum rate in effect and inserting highest rate specified, and

(B)

by striking section 1(e) and inserting section 1.

(3)

Section 511(b)(1) is amended by striking section 1(e) and inserting section 1.

(4)

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

(5)

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

(A)

Except to the extent provided in section 1(h), the rate of tax shall be treated as being the highest rate of tax set forth in section 1(a).

.

(6)

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

(b)

Taxation of income of trust

Except as provided in subsection (f)(1)(B)(ii), there is hereby imposed on the taxable income of an electing Settlement Trust a tax at the rate specified in section 1(a)(1). Such tax shall be in lieu of the income tax otherwise imposed by this chapter on such income.

.

(7)

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

(8)

Section 904(b)(3)(E)(ii)(I) is amended by striking set forth in subsection (a), (b), (c), (d), or (e) of section 1 (whichever applies) and inserting the highest rate of tax specified in section 1.

(9)

Section 1398(c)(2) is amended by striking subsection (d) of.

(10)

Section 3402(p)(1)(B) is amended by striking any percentage applicable to any of the 3 lowest income brackets in the table under section 1(c), and inserting 12 percent, 25 percent,.

(11)

Section 3402(q)(1) is amended by striking the product of third lowest rate of tax applicable under section 1(c) and and inserting 25 percent of.

(12)

Section 3402(r)(3) is amended by striking the amount of tax which would be imposed by section 1(c) (determined without regard to any rate of tax in excess of the fourth lowest rate of tax applicable under section 1(c)) on an amount of taxable income equal to and inserting an amount equal to the product of 25 percent multiplied by.

(13)

Section 3406(a)(1) is amended by striking the product of the fourth lowest rate of tax applicable under section 1(c) and and inserting 25 percent of .

(14)

Section 6103(e)(1)(A)(iii) is amended by inserting (as in effect on the day before the date of the enactment of the Tax Cuts and Jobs Act) after section 1(g).

(c)

Effective date

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

B

Simplification and reform of family and individual tax credits

1101.

Enhancement of child tax credit and new family tax credit

(a)

Increase in credit amount and addition of other dependents

(1)

In general

Section 24(a) is amended to read as follows:

(a)

Allowance of credit

There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—

(1)

with respect to each qualifying child of the taxpayer, $1,600, and

(2)

for taxable years beginning before January 1, 2023, with respect to the taxpayer (each spouse in the case of a joint return) and each dependent of the taxpayer to whom paragraph (1) does not apply, $300.

.

(2)

Conforming amendments

(A)

Section 24(c) is amended—

(i)

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

(ii)

by striking 152(c) in paragraph (2) (as so redesignated) and inserting 7706(c),

(iii)

by inserting before paragraph (2) (as so redesignated) the following new paragraph:

(1)

Dependent

(A)

In general

The term dependent shall have the meaning given such term by section 7706.

(B)

Certain individuals not treated as dependents

In the case of an individual with respect to whom a credit under this section is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, the amount applicable to such individual under subsection (a) for such individual’s taxable year shall be zero.

,

(iv)

in paragraph (3) (as so redesignated)—

(I)

by striking term qualifying child and inserting terms qualifying child and dependent, and

(II)

by striking 152(b)(3) and inserting 7706(b)(3), and

(v)

in the heading by striking Qualifying and inserting Dependent; qualifying.

(B)

The heading for section 24 is amended by inserting and family after Child.

(C)

The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by striking the item relating to section 24 and inserting the following new item:

Sec. 24. Child and family tax credit.

.

(b)

Elimination of marriage penalty

Section 24(b)(2) is amended—

(1)

by striking $110,000 in subparagraph (A) and inserting $230,000,

(2)

by inserting and at the end of subparagraph (A),

(3)

by striking $75,000 in the case of an individual who is not married and all that follows through the period at the end and inserting one-half of the amount in effect under subparagraph (A) for the taxable year in the case of any other individual..

(c)

Credit refundable up to $1,000 per child

(1)

In general

Section 24(d)(1)(A) is amended by striking all that follows under this section and inserting the following:

determined—

(i)

without regard to this subsection and the limitation under section 26(a),

(ii)

without regard to subsection (a)(2), and

(iii)

by substituting $1,000 for $1,600 in subsection (a)(1), or

.

(2)

Inflation adjustment

Section 24(d) is amended by inserting after paragraph (2) the following new paragraph:

(3)

Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2017, the $1,000 amount in paragraph (1)(A)(iii) shall be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

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

Any increase determined under the preceding sentence shall be rounded to the next highest multiple of $100 and shall not exceed the amount in effect under subsection (a)(2).

.

(d)

Effective date

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

1102.

Repeal of nonrefundable credits

(a)

Repeal of section 22

(1)

In general

Subpart A of part IV of subchapter A of chapter 1 is amended by striking section 22 (and by striking the item relating to such section in the table of sections for such subpart).

(2)

Conforming amendment

(A)

Section 86(f) is amended by striking paragraph (1) and by redesignating paragraphs (2), (3), and (4) as paragraphs (1), (2), and (3), respectively.

(B)
(i)

Subsections (c)(3)(B) and (d)(4)(A) of section 7706, as redesignated by this Act, are each amended by striking (as defined in section 22(e)(3).

(ii)

Section 7706(f), as redesignated by this Act, is amended by redesignating paragraph (7) as paragraph (8) and by inserting after paragraph (6) the following new paragraph:

(7)

Permanent and total disability defined

An individual is permanently and totally disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to be permanently and totally disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Secretary may require.

.

(iii)

Section 415(c)(3)(C)(i) is amended by striking 22(e)(3) and inserting 7706(f)(7).

(iv)

Section 422(c)(6) is amended by striking 22(e)(3) and inserting 7706(f)(7).

(b)

Termination of section 25

Section 25, as amended by section 3601, is amended by adding at the end the following new subsection:

(k)

Termination

No credit shall be allowed under this section with respect to any mortgage credit certificate issued after December 31, 2017.

.

(c)

Repeal of section 30D

(1)

In general

Subpart B of part IV of subchapter A of chapter 1 is amended by striking section 30D (and by striking the item relating to such section in the table of sections for such subpart).

(2)

Conforming amendments

(A)

Section 38(b) is amended by striking paragraph (35).

(B)

Section 1016(a) is amended by striking paragraph (37).

(C)

Section 6501(m) is amended by striking 30D(e)(4),.

(d)

Effective date

(1)

In general

Except as provided in paragraphs (2) and (3), the amendments made by this section shall apply to taxable years beginning after December 31, 2017.

(2)

Subsection (b)

The amendment made by subsection (c) shall apply to taxable years ending after December 31, 2017.

(3)

Subsection (c)

The amendments made by subsection (d) shall apply to vehicles placed in service in taxable years beginning after December 31, 2017.

1103.

Refundable credit program integrity

(a)

Identification requirements for child and family tax credit

(1)

In general

Section 24(e) is amended to read as follows:

(e)

Identification requirements

(1)

Requirements for qualifying child

No credit shall be allowed under this section to a taxpayer with respect to any qualifying child unless the taxpayer includes the name and social security number of such qualifying child on the return of tax for the taxable year. The preceding sentence shall not prevent a qualifying child from being treated as a dependent described in subsection (a)(2).

(2)

Other identification requirements

No credit shall be allowed under this section with respect to any individual unless the taxpayer identification number of such individual is included on the return of tax for the taxable year and such identifying number was issued before the due date for filing the return for the taxable year.

(3)

Social security number

For purposes of this subsection, the term social security number means a social security number issued by the Social Security Administration (but only if the social security number is issued to a citizen of the United States or pursuant to subclause (I) (or that portion of subclause (III) that relates to subclause (I)) of section 205(c)(2)(B)(i) of the Social Security Act)).

.

(2)

Omissions treated as mathematical or clerical error

(A)

In general

Section 6213(g)(2)(I) is amended to read as follows:

(I)

an omission of a correct social security number, or a correct TIN, required under section 24(e) (relating to child tax credit), to be included on a return,

.

(b)

Social security number must be provided

(1)

In general

Section 25A(f)(1)(A), as amended by section 1201 of this Act, is amended by striking taxpayer identification number each place it appears and inserting social security number.

(2)

Omission treated as mathematical or clerical error

Section 6213(g)(2)(J) is amended by striking TIN and inserting social security number and employer identification number.

(c)

Individuals prohibited from engaging in employment in United States not eligible for earned income tax credit

Section 32(m) is amended—

(1)

by striking (other than: and all that follows through of the Social Security Act), and

(2)

by inserting before the period at the end the following: , but only if, in the case of subsection (c)(1)(E), the social security number is issued to a citizen of the United States or pursuant to subclause (I) (or that portion of subclause (III) that relates to subclause (I)) of section 205(c)(2)(B)(i) of the Social Security Act.

(d)

Effective date

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

1104.

Procedures to reduce improper claims of earned income credit

(a)

Clarification regarding determination of self-employment income which is treated as earned income

Section 32(c)(2)(B) is amended by striking and at the end of clause (v), by striking the period at the end of clause (vi) and inserting , and, and by adding at the end the following new clause:

(vii)

in determining the taxpayer’s net earnings from self-employment under subparagraph (A)(ii) there shall not fail to be taken into account any deduction which is allowable to the taxpayer under this subtitle.

.

(b)

Required quarterly reporting of wages of employees

Section 6011 is amended by adding at the end the following new subsection:

(i)

Employer reporting of wages

Every person required to deduct and withhold from an employee a tax under section 3101 or 3402 shall include on each return or statement submitted with respect to such tax, the name and address of such employee and the amount of wages for such employee on which such tax was withheld.

.

(c)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

(2)

Reporting

The Secretary of the Treasury, or his designee, may delay the application of the amendment made by subsection (b) for such period as such Secretary (or designee) determines to be reasonable to allow persons adequate time to modify electronic (or other) systems to permit such person to comply with the requirements of such amendment.

1105.

Certain income disallowed for purposes of the earned income tax credit

(a)

Substantiation requirement

Section 32 is amended by adding at the end the following new subsection:

(n)

Inconsistent income reporting

If the earned income of a taxpayer claimed on a return for purposes of this section is not substantiated by statements or returns under sections 6051, 6052, 6041(a), or 6050W with respect to such taxpayer, the Secretary may require such taxpayer to provide books and records to substantiate such income, including for the purpose of preventing fraud.

.

(b)

Exclusion of unsubstantiated amount from earned income

Section 32(c)(2) is amended by adding at the end the following new subparagraph:

(C)

Exclusion

In the case of a taxpayer with respect to which there is an inconsistency described in subsection (n) who fails to substantiate such inconsistency to the satisfaction of the Secretary, the term earned income shall not include amounts to the extent of such inconsistency.

.

(c)

Effective date

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

C

Simplification and reform of education incentives

1201.

American opportunity tax credit

(a)

In general

Section 25A is amended to read as follows:

25A.

American opportunity tax credit

(a)

In general

In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—

(1)

100 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished to any eligible student for whom an election is in effect under this section for such taxable year during any academic period beginning in such taxable year) as does not exceed $2,000, plus

(2)

25 percent of so much of such expenses so paid as exceeds the dollar amount in effect under paragraph (1) but does not exceed twice such dollar amount.

(b)

Portion of credit refundable

40 percent of the credit allowable under subsection (a)(1) (determined without regard to this subsection and section 26(a) and after application of all other provisions of this section) shall be treated as a credit allowable under subpart C (and not under this part). The preceding sentence shall not apply to any taxpayer for any taxable year if such taxpayer is a child to whom section 1(d) applies for such taxable year.

(c)

Limitation based on modified adjusted gross income

(1)

In general

The amount allowable as a credit under subsection (a) for any taxable year shall be reduced (but not below zero) by an amount which bears the same ratio to the amount so allowable (determined without regard to this subsection and subsection (b) but after application of all other provisions of this section) as—

(A)

the excess of—

(i)

the taxpayer’s modified adjusted gross income for such taxable year, over

(ii)

$80,000 (twice such amount in the case of a joint return), bears to

(B)

$10,000 (twice such amount in the case of a joint return).

(2)

Modified adjusted gross income

For purposes of this subsection, the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.

(d)

Other limitations

(1)

Credit allowed only for 5 taxable years

An election to have this section apply may not be made for any taxable year if such an election (by the taxpayer or any other individual) is in effect with respect to such student for any 5 prior taxable years.

(2)

Credit allowed only for first 5 years of postsecondary education

(A)

In general

No credit shall be allowed under subsection (a) for a taxable year with respect to the qualified tuition and related expenses of an eligible student if the student has completed (before the beginning of such taxable year) the first 5 years of postsecondary education at an eligible educational institution.

(B)

Fifth year limitations

In the case of an eligible student with respect to whom an election has been in effect for 4 preceding taxable years for purposes of the fifth taxable year—

(i)

the amount of the credit allowed under this section for the taxable year shall not exceed an amount equal to 50 percent of the credit otherwise determined with respect to such student under this section (without regard to this subparagraph), and

(ii)

the amount of the credit determined under subsection (b) and allowable under subpart C shall not exceed an amount equal to 40 percent of the amount determined with respect to such student under clause (i).

(e)

Definitions

For purposes of this section—

(1)

Eligible student

The term eligible student means, with respect to any academic period, a student who—

(A)

meets the requirements of section 484(a)(1) of the Higher Education Act of 1965 (20 U.S.C. 1091(a)(1)), as in effect on August 5, 1997, and

(B)

is carrying at least ½ the normal full-time work load for the course of study the student is pursuing.

(2)

Qualified tuition and related expenses

(A)

In general

The term qualified tuition and related expenses means tuition, fees, and course materials, required for enrollment or attendance of—

(i)

the taxpayer,

(ii)

the taxpayer’s spouse, or

(iii)

any dependent of the taxpayer,

at an eligible educational institution for courses of instruction of such individual at such institution.
(B)

Exception for education involving sports, etc

Such term does not include expenses with respect to any course or other education involving sports, games, or hobbies, unless such course or other education is part of the individual’s degree program.

(C)

Exception for nonacademic fees

Such term does not include student activity fees, athletic fees, insurance expenses, or other expenses unrelated to an individual's academic course of instruction.

(3)

Eligible educational institution

The term eligible educational institution means an institution—

(A)

which is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect on August 5, 1997, and

(B)

which is eligible to participate in a program under title IV of such Act.

(f)

Special rules

(1)

Identification requirements

(A)

Student

No credit shall be allowed under subsection (a) to a taxpayer with respect to the qualified tuition and related expenses of an individual unless the taxpayer includes the name and taxpayer identification number of such individual on the return of tax for the taxable year, and such taxpayer identification number was issued on or before the due date for filing such return.

(B)

Taxpayer

No credit shall be allowed under this section if the identifying number of the taxpayer was issued after the due date for filing the return for the taxable year.

(C)

Institution

No credit shall be allowed under this section unless the taxpayer includes the employer identification number of any institution to which qualified tuition and related expenses were paid with respect to the individual.

(2)

Adjustment for certain scholarships, etc

The amount of qualified tuition and related expenses otherwise taken into account under subsection (a) with respect to an individual for an academic period shall be reduced (before the application of subsection (c)) by the sum of any amounts paid for the benefit of such individual which are allocable to such period as—

(A)

a qualified scholarship which is excludable from gross income under section 117,

(B)

an educational assistance allowance under chapter 30, 31, 32, 34, or 35 of title 38, United States Code, or under chapter 1606 of title 10, United States Code, and

(C)

a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for such individual's educational expenses, or attributable to such individual's enrollment at an eligible educational institution, which is excludable from gross income under any law of the United States.

(3)

Treatment of expenses paid by dependent

If an individual is a dependent of another taxpayer for a taxable year beginning in the calendar year in which such individuals taxable year begins—

(A)

no credit shall be allowed under subsection (a) to such individual for such individual’s taxable year, and

(B)

qualified tuition and related expenses paid by such individual during such individual’s taxable year shall be treated for purposes of this section as paid by such other taxpayer.

(4)

Treatment of certain prepayments

If qualified tuition and related expenses are paid by the taxpayer during a taxable year for an academic period which begins during the first 3 months following such taxable year, such academic period shall be treated for purposes of this section as beginning during such taxable year.

(5)

Denial of double benefit

No credit shall be allowed under this section for any amount for which a deduction is allowed under any other provision of this chapter.

(6)

No credit for married individuals filing separate returns

If the taxpayer is a married individual (within the meaning of section 7703), this section shall apply only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year.

(7)

Nonresident aliens

If the taxpayer is a nonresident alien individual for any portion of the taxable year, this section shall apply only if such individual is treated as a resident alien of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013.

(8)

Restrictions on taxpayers who improperly claimed credit in prior year

(A)

Taxpayers making prior fraudulent or reckless claims

(i)

In general

No credit shall be allowed under this section for any taxable year in the disallowance period.

(ii)

Disallowance period

For purposes of clause (i), the disallowance period is—

(I)

the period of 10 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of credit under this section was due to fraud, and

(II)

the period of 2 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of credit under this section was due to reckless or intentional disregard of rules and regulations (but not due to fraud).

(B)

Taxpayers making improper prior claims

In the case of a taxpayer who is denied credit under this section for any taxable year as a result of the deficiency procedures under subchapter B of chapter 63, no credit shall be allowed under this section for any subsequent taxable year unless the taxpayer provides such information as the Secretary may require to demonstrate eligibility for such credit.

(g)

Inflation adjustment

(1)

In general

In the case of a taxable year beginning after 2018, the $80,000 amount in subsection (c)(1)(A)(ii) shall each be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting calendar year 2017 for calendar year 2016 in clause (ii) thereof.

(2)

Rounding

If any amount as adjusted under paragraph (1) is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.

(h)

Regulations

The Secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out this section, including regulations providing for a recapture of the credit allowed under this section in cases where there is a refund in a subsequent taxable year of any amount which was taken into account in determining the amount of such credit.

.

(b)

Conforming amendments

(1)

Section 72(t)(7)(B) is amended by striking section 25A(g)(2) and inserting section 25A(f)(2).

(2)

Section 529(c)(3)(B)(v)(I) is amended by striking section 25A(g)(2) and inserting section 25A(f)(2).

(3)

Section 529(e)(3)(B)(i) is amended by striking section 25A(b)(3) and inserting section 25A(d).

(4)

Section 530(d)(2)(C) is amended—

(A)

by striking section 25A(g)(2) in clause (i)(I) and inserting section 25A(f)(2), and

(B)

by striking Hope and Lifetime Learning credits in the heading and inserting American opportunity tax credit.

(5)

Section 530(d)(4)(B)(iii) is amended by striking section 25A(g)(2) and inserting section 25A(d)(4)(B).

(6)

Section 6050S(e) is amended by striking subsection (g)(2) and inserting subsection (f)(2).

(7)

Section 6211(b)(4)(A) is amended by striking subsection (i)(6) and inserting subsection (b).

(8)

Section 6213(g)(2)(J) is amended by striking TIN required under section 25A(g)(1) and inserting TIN, and employer identification number, required under section 25A(f)(1).

(9)

Section 6213(g)(2)(Q) is amended to read as follows:

(Q)

an omission of information required by section 25A(f)(8)(B) or an entry on the return claiming the credit determined under section 25A(a) for a taxable year for which the credit is disallowed under section 25A(f)(8)(A).

.

(10)

Section 1004(c) of division B of the American Recovery and Reinvestment Tax Act of 2009 is amended—

(A)

in paragraph (1)—

(i)

by striking section 25A(i)(6) each place it appears and inserting section 25A(b), and

(ii)

by striking with respect to taxable years beginning after 2008 and before 2018 each place it appears and inserting with respect to each taxable year,

(B)

in paragraph (2), by striking Section 25A(i)(6) and inserting Section 25A(b), and

(C)

in paragraph (3)(C), by striking subsection (i)(6) and inserting subsection (b).

(11)

The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by striking the item relating to section 25A and inserting the following new item:

Sec. 25A. American opportunity tax credit.

.

(c)

Effective date

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

1202.

Consolidation of education savings rules

(a)

No new contributions to Coverdell education savings account

Section 530(b)(1)(A) is amended to read as follows:

(A)

Except in the case of rollover contributions, no contribution will be accepted after December 31, 2017.

.

(b)

Limited distribution allowed for elementary and secondary tuition

(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 expenses for tuition in connection with enrollment at an elementary or secondary school.

.

(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 for tuition incurred during the taxable year in connection with the enrollment or attendance of the beneficiary as an elementary or secondary school student at a public, private, or religious school..

(c)

Rollovers to qualified tuition programs permitted

Section 530(d)(5) is amended by inserting , or into (by purchase or contribution) a qualified tuition program (as defined in section 529), after into another Coverdell education savings account.

(d)

Distributions from qualified tuition programs for certain expenses associated with registered apprenticeship programs

Section 529(e)(3) is amended by adding at the end the following new subparagraph:

(C)

Certain expenses associated with registered apprenticeship programs

The term qualified higher education expenses shall include books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act (29 U.S.C. 50).

.

(e)

Unborn children allowed as account beneficiaries

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

(6)

Treatment of unborn children

(A)

In general

Nothing shall prevent an unborn child from being treated as a designated beneficiary or an individual under this section.

(B)

Unborn child

For purposes of this paragraph—

(i)

In general

The term unborn child means a child in utero.

(ii)

Child in utero

The term child in utero means a member of the species homo sapiens, at any stage of development, who is carried in the womb.

.

(f)

Effective dates

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to contributions made after December 31, 2017.

(2)

Rollovers to qualified tuition programs

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

1203.

Reforms to discharge of certain student loan indebtedness

(a)

Treatment of student loans discharged on account of death or disability

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 does not include any amount which (but for this subsection) would be includible in gross income by reasons of the discharge (in whole or in part) of any loan described in subparagraph (B) if such discharge was—

(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)

Exclusion from gross income for payments made under indian health service loan repayment program

(1)

In general

Section 108(f)(4) is amended by inserting under section 108 of the Indian Health Care Improvement Act, after 338I of such Act,.

(2)

Clerical amendment

The heading for section 108(f)(4) is amended by striking and certain and inserting , indian health service loan repayment program, and certain.

(c)

Effective dates

(1)

Subsection (a)

The amendment made by subsection (a)(1) shall apply to discharges of indebtedness after December 31, 2017.

(2)

Subsection (b)

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

1204.

Repeal of other provisions relating to education

(a)

In general

Subchapter B of chapter 1 is amended—

(1)

in part VII by striking sections 221 and 222 (and by striking the items relating to such sections in the table of sections for such part),

(2)

in part VII by striking sections 135 and 127 (and by striking the items relating to such sections in the table of sections for such part), and

(3)

by striking subsection (d) of section 117.

(b)

Conforming amendment relating to section 221

(1)

Section 62(a) is amended by striking paragraph (17).

(2)

Section 74(d) is amended by striking 221,.

(3)

Section 86(b)(2)(A) is amended by striking 221,.

(4)

Section 219(g)(3)(A)(ii) is amended by striking 221,.

(5)

Section 163(h)(2) is amended by striking subparagraph (F).

(6)

Section 6050S(a) is amended—

(A)

by inserting or at the end of paragraph (1),

(B)

by striking or at the end of paragraph (2), and

(C)

by striking paragraph (3).

(7)

Section 6050S(e) is amended by striking all that follows thereof) and inserting a period.

(c)

Conforming amendments related to section 222

(1)

Section 62(a) is amended by striking paragraph (18).

(2)

Section 74(d)(2)(B) is amended by striking 222,.

(3)

Section 86(b)(2)(A) is amended by striking 222,.

(4)

Section 219(g)(3)(A)(ii) is amended by striking 222,.

(d)

Conforming amendments relating to section 127

(1)

Section 125(f)(1) is amended by striking 127,.

(2)

Section 132(j)(8) is amended by striking which are not excludable from gross income under section 127.

(3)

Section 414(n)(3)(C) is amended by striking 127,.

(4)

Section 414(t)(2) is amended by striking 127,.

(5)

Section 3121(a)(18) is amended by striking 127,.

(6)

Section 3231(e) is amended by striking paragraph (6).

(7)

Section 3306(b)(13) is amended by 127,.

(8)

Section 3401(a)(18) is amended by striking 127,.

(9)

Section 6039D(d)(1) is amended by striking , 127.

(e)

Conforming amendments relating to section 117(d)

(1)

Section 117(c)(1) is amended—

(A)

by striking subsections (a) and (d) and inserting subsection (a), and

(B)

by striking or qualified tuition reduction.

(2)

Section 414(n)(3)(C) is amended by striking 117(d),.

(3)

Section 414(t)(2) is amended by striking 117(d),.

(f)

Conforming amendments related to section 135

(1)

Section 74(d)(2)(B) is amended by striking 135,.

(2)

Section 86(b)(2)(A) is amended by striking 135,.

(3)

Section 219(g)(3)(A)(ii) is amended by striking 135,.

(g)

Effective dates

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.

(2)

Amendments relating to section 117(d)

The amendments made by subsections (a)(3) and (e) shall apply to amounts paid or incurred after December 31, 2017.

1205.

Rollovers between qualified tuition programs and qualified ABLE programs

(a)

Rollovers from qualified tuition programs to qualified ABLE programs

Section 529(c)(3)(C)(i) 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 new subclause:

(III)

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).

.

(b)

Effective date

The amendments made by this section shall apply to distributions after December 31, 2017.

D

Simplification and reform of deductions

1301.

Repeal of overall limitation on itemized deductions

(a)

In general

Part 1 of subchapter B of chapter 1 is amended by striking section 68 (and the item relating to such section in the table of sections for such part).

(b)

Effective date

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

1302.

Mortgage interest

(a)

Modification of limitations

(1)

In general

Section 163(h)(3) is amended to read as follows:

(3)

Qualified residence interest

For purposes of this subsection—

(A)

In general

The term qualified residence interest means any interest which is paid or accrued during the taxable year on indebtedness which—

(i)

is incurred in acquiring, constructing, or substantially improving any qualified residence (determined as of the time the interest is accrued) of the taxpayer, and

(ii)

is secured by such residence.

Such term also includes interest on any indebtedness secured by such residence resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence (or this sentence); but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.
(B)

Limitation

The aggregate amount of indebtedness taken into account under subparagraph (A) for any period shall not exceed $500,000 (half of such amount in the case of a married individual filing a separate return).

(C)

Treatment of indebtedness incurred on or before November 2, 2017

(i)

In general

In the case of any pre-November 2, 2017, indebtedness, this paragraph shall apply as in effect immediately before the enactment of the Tax Cuts and Jobs Act.

(ii)

Pre-November 2, 2017, indebtedness

For purposes of this subparagraph, the term pre-November 2, 2017, indebtedness means—

(I)

any principal residence acquisition indebtedness which was incurred on or before November 2, 2017, or

(II)

any principal residence acquisition indebtedness which is incurred after November 2, 2017, to refinance indebtedness described in clause (i) (or refinanced indebtedness meeting the requirements of this clause) to the extent (immediately after the refinancing) the principal amount of the indebtedness resulting from the refinancing does not exceed the principal amount of the refinanced indebtedness (immediately before the refinancing).

(iii)

Limitation on period of refinancing

clause (ii)(II) shall not apply to any indebtedness after—

(I)

the expiration of the term of the original indebtedness, or

(II)

if the principal of such original indebtedness is not amortized over its term, the expiration of the term of the 1st refinancing of such indebtedness (or if earlier, the date which is 30 years after the date of such 1st refinancing).

(iv)

Binding contract exception

In the case of a taxpayer who enters into a written binding contract before November 2, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchases such residence before April 1, 2018, subparagraphs (A) and (B) shall be applied by substituting April 1, 2018 for November 2, 2017.

.

(2)

Conforming amendments

(A)

Section 108(h)(2) is by striking for $1,000,000 ($500,000 in clause (ii) thereof and inserting for $500,000 ($250,000 in paragraph (2)(A), and $1,000,000 for $500,000 in paragraph (2)(B), thereof.

(B)

Section 163(h) is amended by striking subparagraphs (E) and (F) in paragraph (4).

(b)

Taxpayers limited to 1 qualified residence

Section 163(h)(4)(A)(i) is amended to read as follows:

(i)

In general

The term qualified residence means the principal residence (within the meaning of section 121) of the taxpayer.

.

(c)

Effective dates

(1)

In general

The amendments made by this section shall apply to interest paid or accrued in taxable years beginning after December 31, 2017, with respect to indebtedness incurred before, on, or after such date.

(2)

Treatment of grandfathered indebtedness

For application of the amendments made by this section to grandfathered indebtedness, see paragraph (3)(C) of section 163(h) of the Internal Revenue Code of 1986, as amended by this section.

1303.

Repeal of deduction for certain taxes not paid or accrued in a trade or business

(a)

In general

Section 164(b)(5) is amended to read as follows:

(5)

Limitation in case of individuals

In the case of a taxpayer other than a corporation—

(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, and

(D)

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

.

(b)

Effective date

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

1304.

Repeal of deduction for personal casualty losses

(a)

In general

Section 165(c) is amended by inserting and at the end of paragraph (1), by striking ; and at the end of paragraph (2) and inserting a period, and by striking paragraph (3).

(b)

Conforming amendments

(1)

Section 165(h) is amended to read as follows:

(h)

Special rule where personal casualty gains exceed personal casualty losses

(1)

In general

If the personal casualty gains for any taxable year exceed the personal casualty losses for such taxable year—

(A)

all such gains shall be treated as gains from sales or exchanges of capital assets, and

(B)

all such losses shall be treated as losses from sales or exchanges of capital assets.

(2)

Definitions of personal casualty gain and personal casualty loss

For purposes of this subsection—

(A)

Personal casualty loss

The term personal casualty loss means any loss of property not connected with a trade or business or a transaction entered into for profit, if such loss arises from fire, storm, shipwreck, or other casualty, or from theft.

(B)

Personal casualty gain

The term personal casualty gain means the recognized gain from any involuntary conversion of property which is described in subparagraph (A) arising from fire, storm, shipwreck, or other casualty, or from theft.

.

(2)

Section 165 is amended by striking subsection (k).

(3)
(A)

Section 165(l)(1) is amended by striking a loss described in subsection (c)(3) and inserting an ordinary loss described in subsection (c)(2).

(B)

Section 165(l) is amended—

(i)

by striking paragraph (5),

(ii)

by redesignating paragraphs (2), (3), and (4) as paragraphs (3), (4), and (5), respectively, and

(iii)

by inserting after paragraph (1) the following new paragraph:

(2)

Limitations

(A)

Deposit may not be federally insured

No election may be made under paragraph (1) with respect to any loss on a deposit in a qualified financial institution if part or all of such deposit is insured under Federal law.

(B)

Dollar limitation

With respect to each financial institution, the aggregate amount of losses attributable to deposits in such financial institution to which an election under paragraph (1) may be made by the taxpayer for any taxable year shall not exceed $20,000 ($10,000 in the case of a separate return by a married individual). The limitation of the preceding sentence shall be reduced by the amount of any insurance proceeds under any State law which can reasonably be expected to be received with respect to losses on deposits in such institution.

.

(4)

Section 172(b)(1)(E)(ii), prior to amendment under title III, is amended by striking subclause (I) and by redesignating subclauses (II) and (III) as subclauses (I) and (II), respectively.

(5)

Section 172(d)(4)(C) is amended by striking paragraph (2) or (3) of section 165(c) and inserting section 165(c)(2).

(6)

Section 274(f) is amended by striking casualty losses, in the heading thereof.

(7)

Section 280A(b) is amended by striking casualty losses, in the heading thereof.

(8)

Section 873(b), as amended by the preceding provisions of this Act, is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.

(9)

Section 504(b) of the Disaster Tax Relief and Airport and Airway Extension Act of 2017 is amended by adding at the end the following new paragraph:

(4)

Coordination with Tax Reform

This subsection shall be applied without regard to the amendments made by section 1304 of the Tax Cuts and Jobs Act.

.

(c)

Effective date

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

1305.

Limitation on wagering losses

(a)

In general

Section 165(d) is amended by adding at the end the following: For purposes of the preceding sentence, the term losses from wagering transactions includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction..

(b)

Effective date

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

1306.

Charitable contributions

(a)

Increased limitation for cash contributions

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 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), 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

Subparagraphs (A) and (B) shall be applied by reducing (but not below zero) the aggregate contribution limitation allowed for the taxable year under each such subparagraph by the aggregate contributions allowed under this subparagraph for such taxable year.

.

(b)

Denial of deduction for college athletic event seating rights

Section 170(l)(1) is amended to read as follows:

(1)

In general

No deduction shall be allowed under this section for any amount described in paragraph (2).

.

(c)

Charitable mileage rate adjusted for inflation

Section 170(i) is amended by striking shall be 14 cents per mile and inserting shall be a rate which takes into account the variable cost of operating an automobile.

(d)

Repeal of substantiation exception in case of contributions reported by donee

Section 170(f)(8) is amended by striking subparagraph (D) and by redesignating subparagraph (E) as subparagraph (D).

(e)

Effective date

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

1307.

Repeal of deduction for tax preparation expenses

(a)

In general

Section 212 is amended by adding or at the end of paragraph (1), by striking ; or at the end of paragraph (2) and inserting a period, and by striking paragraph (3).

(b)

Effective date

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

1308.

Repeal of medical expense deduction

(a)

In general

Part VII of subchapter B is amended by striking by striking section 213 (and by striking the item relating to such section in the table of sections for such subpart).

(b)

Conforming amendments

(1)
(A)

Section 105(f) is amended to read as follows:

(f)

Medical care

For purposes of this section—

(1)

In general

The term medical care means amounts paid—

(A)

for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,

(B)

for transportation primarily for and essential to medical care referred to in subparagraph (A),

(C)

for qualified long-term care services (as defined in section 7702B(c)), or

(D)

for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B(b)).

In the case of a qualified long-term care insurance contract (as defined in section 7702B(b)), only eligible long-term care premiums (as defined in paragraph (7)) shall be taken into account under subparagraph (D).
(2)

Amounts paid for certain lodging away from home treated as paid for medical care

Amounts paid for lodging (not lavish or extravagant under the circumstances) while away from home primarily for and essential to medical care referred to in paragraph (1)(A) shall be treated as amounts paid for medical care if—

(A)

the medical care referred to in paragraph (1)(A) is provided by a physician in a licensed hospital (or in a medical care facility which is related to, or the equivalent of, a licensed hospital), and

(B)

there is no significant element of personal pleasure, recreation, or vacation in the travel away from home.

The amount taken into account under the preceding sentence shall not exceed $50 for each night for each individual.
(3)

Physician

The term physician has the meaning given to such term by section 1861(r) of the Social Security Act (42 U.S.C. 1395x(r)).

(4)

Contracts covering other than medical care

In the case of an insurance contract under which amounts are payable for other than medical care referred to in subparagraphs (A), (B) and (C) of paragraph (1)—

(A)

no amount shall be treated as paid for insurance to which paragraph (1)(D) applies unless the charge for such insurance is either separately stated in the contract, or furnished to the policyholder by the insurance company in a separate statement,

(B)

the amount taken into account as the amount paid for such insurance shall not exceed such charge, and

(C)

no amount shall be treated as paid for such insurance if the amount specified in the contract (or furnished to the policyholder by the insurance company in a separate statement) as the charge for such insurance is unreasonably large in relation to the total charges under the contract.

(5)

Certain pre-paid contracts

Subject to the limitations of paragraph (4), premiums paid during the taxable year by a taxpayer before he attains the age of 65 for insurance covering medical care (within the meaning of subparagraphs (A), (B), and (C) of paragraph (1)) for the taxpayer, his spouse, or a dependent after the taxpayer attains the age of 65 shall be treated as expenses paid during the taxable year for insurance which constitutes medical care if premiums for such insurance are payable (on a level payment basis) under the contract for a period of 10 years or more or until the year in which the taxpayer attains the age of 65 (but in no case for a period of less than 5 years).

(6)

Cosmetic surgery

(A)

In general

The term medical care does not include cosmetic surgery or other similar procedures, unless the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease.

(B)

Cosmetic surgery defined

For purposes of this paragraph, the term cosmetic surgery means any procedure which is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease.

(7)

Eligible long-term care premiums

(A)

In general

For purposes of this section, the term eligible long-term care premiums means the amount paid during a taxable year for any qualified long-term care insurance contract (as defined in section 7702B(b)) covering an individual, to the extent such amount does not exceed the limitation determined under the following table:

In the case of an individual with an attained age before the close of the taxable year of:The limitation is:
40 or less$200
More than 40 but not more than 50$375
More than 50 but not more than 60$750
More than 60 but not more than 70$2,000
More than 70$2,500
(B)

Indexing

(i)

In general

In the case of any taxable year beginning after 1997, each dollar amount in subparagraph (A) shall be increased by the medical care cost adjustment of such amount for such calendar year. Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $10.

(ii)

Medical care cost adjustment

For purposes of clause (i), the medical care cost adjustment for any calendar year is the adjustment prescribed by the Secretary, in consultation with the Secretary of Health and Human Services, for purposes of such clause. To the extent that CPI (as defined section 1(c)), or any component thereof, is taken into account in determining such adjustment, such adjustment shall be determined by taking into account C-CPI-U (as so defined), or the corresponding component thereof, in lieu of such CPI (or component thereof), but only with respect to the portion of such adjustment which relates to periods after December 31, 2017.

(8)

Certain payments to relatives treated as not paid for medical care

An amount paid for a qualified long-term care service (as defined in section 7702B(c)) provided to an individual shall be treated as not paid for medical care if such service is provided—

(A)

by the spouse of the individual or by a relative (directly or through a partnership, corporation, or other entity) unless the service is provided by a licensed professional with respect to such service, or

(B)

by a corporation or partnership which is related (within the meaning of section 267(b) or 707(b)) to the individual.

For purposes of this paragraph, the term relative means an individual bearing a relationship to the individual which is described in any of subparagraphs (A) through (G) of section 7706(d)(2). This paragraph shall not apply for purposes of subsection (b) with respect to reimbursements through insurance.

.

(B)

Section 72(t)(2)(D)(i)(III) is amended by striking section 213(d)(1)(D) and inserting section 105(f)(1)(D).

(C)

Section 104(a) is amended by striking section 213(d)(1) in the last sentence and inserting section 105(f)(1).

(D)

Section 105(b) is amended by striking section 213(d) and inserting section 105(f).

(E)

Section 139D is amended by striking section 213 and inserting section 223.

(F)

Section 162(l)(2) is amended by striking section 213(d)(10) and inserting section 105(f)(7).

(G)

Section 220(d)(2)(A) is amended by striking section 213(d) and inserting section 105(f).

(H)

Section 223(d)(2)(A) is amended by striking section 213(d) and inserting section 105(f).

(I)

Section 419A(f)(2) is amended by striking section 213(d) and inserting section 105(f).

(J)

Section 501(c)(26)(A) is amended by striking section 213(d) and inserting section 105(f).

(K)

Section 2503(e) is amended by striking section 213(d) and inserting section 105(f).

(L)

Section 4980B(c)(4)(B)(i)(I) is amended by striking section 213(d) and inserting section 105(f).

(M)

Section 6041(f) is amended by striking section 213(d) and inserting section 105(f).

(N)

Section 7702B(a)(2) is amended by striking section 213(d) and inserting section 105(f).

(O)

Section 7702B(a)(4) is amended by striking section 213(d)(1)(D) and inserting section 105(f)(1)(D).

(P)

Section 7702B(d)(5) is amended by striking section 213(d)(10) and inserting section 105(f)(7).

(Q)

Section 9832(d)(3) is amended by striking section 213(d) and inserting section 105(f).

(2)

Section 72(t)(2)(B) is amended to read as follows:

(B)

Medical expenses

Distributions made to an individual (other than distributions described in subparagraph (A), (C), or (D) to the extent such distributions do not exceed the excess of—

(i)

the expenses paid by the taxpayer during the taxable year, not compensated for by insurance or otherwise, for medical care (as defined in 105(f)) of the taxpayer, his spouse, or a dependent (as defined in section 7706, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), over

(ii)

10 percent of the taxpayer’s adjusted gross income.

.

(3)

Section 162(l) is amended by striking paragraph (3).

(4)

Section 402(l) is amended by striking paragraph (7) and redesignating paragraph (8) as paragraph (7).

(5)

Section 220(f) is amended by striking paragraph (6).

(6)

Section 223(f) is amended by striking paragraph (6).

(7)

Section 7702B(e) is amended by striking paragraph (2).

(8)

Section 7706(f)(7), as redesignated by this Act, is amended by striking sections 105(b), 132(h)(2)(B), and 213(d)(5) and inserting sections 105(b) and 132(h)(2)(B).

(c)

Effective date

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

1309.

Repeal of deduction for alimony payments

(a)

In general

Part VII of subchapter B is amended by striking by striking section 215 (and by striking the item relating to such section in the table of sections for such subpart).

(b)

Conforming amendments

(1)

Corresponding repeal of provisions providing for inclusion of alimony in gross income

(A)

Subsection (a) of section 61 is amended by striking paragraph (8) and by redesignating paragraphs (9) through (15) as paragraphs (8) through (14), respectively.

(B)

Part II of subchapter B of chapter 1 is amended by striking section 71 (and by striking the item relating to such section in the table of sections for such part).

(C)

Subpart F of part I of subchapter J of chapter 1 is amended by striking section 682 (and by striking the item relating to such section in the table of sections for such subpart).

(2)

Related to repeal of section 215

(A)

Section 62(a) is amended by striking paragraph (10).

(B)

Section 3402(m)(1) is amended by striking (other than paragraph (10) thereof).

(3)

Related to repeal of section 71

(A)

Section 121(d)(3) is amended—

(i)

by striking (as defined in section 71(b)(2)) in subparagraph (B), and

(ii)

by adding at the end the following new subparagraph:

(C)

Divorce or separation instrument

For purposes of this paragraph, the term divorce or separation instrument means—

(i)

a decree of divorce or separate maintenance or a written instrument incident to such a decree,

(ii)

a written separation agreement, or

(iii)

a decree (not described in clause (i)) requiring a spouse to make payments for the support or maintenance of the other spouse.

.

(B)

Section 220(f)(7) is amended by striking subparagraph (A) of section 71(b)(2) and inserting clause (i) of section 121(d)(3)(C).

(C)

Section 223(f)(7) is amended by striking subparagraph (A) of section 71(b)(2) and inserting clause (i) of section 121(d)(3)(C).

(D)

Section 382(l)(3)(B)(iii) is amended by striking section 71(b)(2) and inserting section 121(d)(3)(C).

(E)

Section 408(d)(6) is amended by striking subparagraph (A) of section 71(b)(2) and inserting clause (i) of section 121(d)(3)(C).

(c)

Effective date

The amendments made by this section shall apply to—

(1)

any divorce or separation instrument (as defined in section 71(b)(2) of the Internal Revenue Code of 1986 as in effect before the date of the enactment of this Act) executed after December 31, 2017, and

(2)

any divorce or separation instrument (as so defined) executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification.

1310.

Repeal of deduction for moving expenses

(a)

In general

Part VII of subchapter B is amended by striking by striking section 217 (and by striking the item relating to such section in the table of sections for such subpart).

(b)

Retention of moving expenses for members of Armed Forces

Section 134(b) is amended by adding at the end the following new paragraph:

(7)

Moving expenses

The term qualified military benefit includes any benefit described in section 217(g) (as in effect before the enactment of the Tax Cuts And Jobs Act).

.

(c)

Conforming amendments

(1)

Section 62(a) is amended by striking paragraph (15).

(2)

Section 274(m)(3) is amended by striking (other than section 217).

(3)

Section 3121(a) is amended by striking paragraph (11).

(4)

Section 3306(b) is amended by striking paragraph (9).

(5)

Section 3401(a) is amended by striking paragraph (15).

(6)

Section 7872(f) is amended by striking paragraph (11).

(d)

Effective date

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

1311.

Termination of deduction and exclusions for contributions to medical savings accounts

(a)

Termination of income tax deduction

Section 220 is amended by adding at the end the following new subsection:

(k)

Termination

No deduction shall be allowed under subsection (a) with respect to any taxable year beginning after December 31, 2017.

.

(b)

Termination of exclusion for employer-Provided contributions

Section 106 is amended by striking subsection (b).

(c)

Conforming amendments

(1)

Section 62(a) is amended by striking paragraph (16).

(2)

Section 106(d) is amended by striking paragraph (2), by redesignating paragraph (3) as paragraph (6), and by inserting after paragraph (1) the following new paragraphs:

(2)

No constructive receipt

No amount shall be included in the gross income of any employee solely because the employee may choose between the contributions referred to in paragraph (1) and employer contributions to another health plan of the employer.

(3)

Special rule for deduction of employer contributions

Any employer contribution to a health savings account (as so defined), if otherwise allowable as a deduction under this chapter, shall be allowed only for the taxable year in which paid.

(4)

Employer health savings account contribution required to be shown on return

Every individual required to file a return under section 6012 for the taxable year shall include on such return the aggregate amount contributed by employers to the health savings accounts (as so defined) of such individual or such individual’s spouse for such taxable year.

(5)

Health savings account contributions not part of COBRA coverage

Paragraph (1) shall not apply for purposes of section 4980B.

.

(3)

Section 223(b)(4) is amended by striking subparagraph (A), by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively, and by striking the second sentence thereof.

(4)

Section 223(b)(5) is amended by striking under paragraph (3)) and all that follows through shall be divided equally between them and inserting the following: under paragraph (3)) shall be divided equally between the spouses.

(5)

Section 223(c) is amended by striking paragraph (5).

(6)

Section 3231(e) is amended by striking paragraph (10).

(7)

Section 3306(b) is amended by striking paragraph (17).

(8)

Section 3401(a) is amended by striking paragraph (21).

(9)

Chapter 43 is amended by striking section 4980E (and by striking the item relating to such section in the table of sections for such chapter).

(10)

Section 4980G is amended to read as follows:

4980G.

Failure of employer to make comparable health savings account contributions

(a)

In general

In the case of an employer who makes a contribution to the health savings account of any employee during a calendar year, there is hereby imposed a tax on the failure of such employer to meet the requirements of subsection (d) for such calendar year.

(b)

Amount of tax

The amount of the tax imposed by subsection (a) on any failure for any calendar year is the amount equal to 35 percent of the aggregate amount contributed by the employer to health savings accounts of employees for taxable years of such employees ending with or within such calendar year.

(c)

Waiver by Secretary

In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved.

(d)

Employer required To make comparable health savings account contributions for all participating employees

(1)

In general

An employer meets the requirements of this subsection for any calendar year if the employer makes available comparable contributions to the health savings accounts of all comparable participating employees for each coverage period during such calendar year.

(2)

Comparable contributions

(A)

In general

For purposes of paragraph (1), the term comparable contributions means contributions—

(i)

which are the same amount, or

(ii)

which are the same percentage of the annual deductible limit under the high deductible health plan covering the employees.

(B)

Part-year employees

In the case of an employee who is employed by the employer for only a portion of the calendar year, a contribution to the health savings account of such employee shall be treated as comparable if it is an amount which bears the same ratio to the comparable amount (determined without regard to this subparagraph) as such portion bears to the entire calendar year.

(3)

Comparable participating employees

(A)

In general

For purposes of paragraph (1), the term comparable participating employees means all employees—

(i)

who are eligible individuals covered under any high deductible health plan of the employer, and

(ii)

who have the same category of coverage.

(B)

Categories of coverage

For purposes of subparagraph (B), the categories of coverage are self-only and family coverage.

(4)

Part-time employees

(A)

In general

Paragraph (3) shall be applied separately with respect to part-time employees and other employees.

(B)

Part-time employee

For purposes of subparagraph (A), the term part-time employee means any employee who is customarily employed for fewer than 30 hours per week.

(5)

Special rule for non-highly compensated employees

For purposes of applying this section to a contribution to a health savings account of an employee who is not a highly compensated employee (as defined in section 414(q)), highly compensated employees shall not be treated as comparable participating employees.

(e)

Controlled groups

For purposes of this section, all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer.

(f)

Definitions

Terms used in this section which are also used in section 223 have the respective meanings given such terms in section 223.

(g)

Regulations

The Secretary shall issue regulations to carry out the purposes of this section.

.

(11)

Section 6051(a) is amended by striking paragraph (11).

(12)

Section 6051(a)(14)(A) is amended by striking paragraphs (11) and (12) and inserting paragraph (12).

(d)

Effective date

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

1312.

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

(a)

In general

Part IX of subchapter B of chapter 1 is amended by inserting after the item relating to section 262 the following new item:

262A.

Expenses attributable to being an employee

(a)

In general

Except as otherwise provided in this section, no deduction shall be allowed with respect to any trade or business of the taxpayer which consists of the performance of services by the taxpayer as an employee.

(b)

Exception for above-the-line deductions

Subsection (a) shall not apply to any deduction allowable (determined without regard to subsection (a)) in determining adjusted gross income.

.

(b)

Repeal of certain above-the-line trade and business deductions of employees

(1)

In general

Section 62(a)(2) is amended—

(A)

by striking subparagraphs (B), (C), and (D), and

(B)

by redesignating subparagraph (E) as subparagraph (B).

(2)

Conforming amendments

(A)

Section 62 is amended by striking subsections (b) and (d) and by redesignating subsections (c) and (e) as subsections (b) and (c), respectively.

(B)

Section 62(a)(20) is amended by striking subsection (e) and inserting subsection (c).

(c)

Continued exclusion of working condition fringe benefits

Section 132(d) is amended by inserting (determined without regard to section 262A) after section 162.

(d)

Effective date

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

E

Simplification and reform of exclusions and taxable compensation

1401.

Limitation on exclusion for employer-provided housing

(a)

In general

Section 119 is amended by adding at the end the following new subsection:

(e)

Limitation on exclusion of lodging

(1)

In general

The aggregate amount excluded from gross income of the taxpayer under subsections (a) and (d) with respect to lodging for any taxable year shall not exceed $50,000 (half such amount in the case of a married individual filing a separate return).

(2)

Limitation to 1 home

Subsections (a) and (d) (separately and in combination) shall not apply with respect to more than 1 residence of the taxpayer at any given time. In the case of a joint return, the preceding sentence shall apply separately to each spouse for any period during which each spouse resides separate from the other spouse in a residence which is provided in connection with the employment of each spouse, respectively.

(3)

Limitation for highly compensated employees

(A)

Reduced for excess compensation

In the case of an individual whose compensation for the taxable year exceeds the amount in effect under section 414(q)(1)(B)(i) for the calendar in which such taxable year begins, the $50,000 amount under paragraph (1) shall be reduced (but not below zero) by an amount equal to 50 percent of such excess. For purposes of the preceding sentence, the term compensation means wages (as defined in section 3121(a) (without regard to the contribution and benefit base limitation in section 3121(a)(1)).

(B)

Exclusion denied for 5-percent owners

In the case of an individual who is a 5-percent owner (as defined in section 416(i)(1)(B)(i)) of the employer at any time during the taxable year, the amount under paragraph (1) shall be zero.

.

(b)

Effective date

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

1402.

Exclusion of gain from sale of a principal residence

(a)

Requirement that residence be principal residence for 5 years during 8-year period

Subsection (a) of section 121 is amended—

(1)

by striking 5-year period and inserting 8-year period, and

(2)

by striking 2 years and inserting 5 years.

(b)

Application to only 1 sale or exchange every 5 years

Paragraph (3) of section 121(b) is amended to read as follows:

(3)

Application to only 1 sale or exchange every 5 years

Subsection (a) shall not apply to any sale or exchange by the taxpayer if, during the 5-year period ending on the date of such sale or exchange, there was any other sale or exchange by the taxpayer to which subsection (a) applied.

.

(c)

Phaseout based on modified adjusted gross income

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

(h)

Phaseout based on modified adjusted gross income

(1)

In general

If the average modified adjusted gross income of the taxpayer for the taxable year and the 2 preceding taxable years exceeds $250,000 (twice such amount in the case of a joint return), the amount which would (but for this subsection) be excluded from gross income under subsection (a) for such taxable year shall be reduced (but not below zero) by the amount of such excess.

(2)

Modified adjusted gross income

For purposes of this subsection, the term modified adjusted gross income means, with respect to any taxable year, adjusted gross income determined after application of this section (but without regard to subsection (b)(1) and this subsection).

(3)

Special rule for joint returns

In the case of a joint return, the average modified adjusted gross income of the taxpayer shall be determined without regard to any taxable year with respect to which the taxpayer did not file a joint return.

.

(d)

Conforming amendments

(1)

The following provisions of section 121 are each amended by striking 5-year period each place it appears therein and inserting 8-year period:

(A)

Subsection (b)(5)(C)(ii)(I).

(B)

Subsection (c)(1)(B)(i)(I).

(C)

Subsection (d)(7)(B).

(D)

Subparagraphs (A) and (B) of subsection (d)(9).

(E)

Subsection (d)(10).

(F)

Subsection (d)(12)(A).

(2)

Section 121(c)(1)(B)(ii) is amended by striking 2 years and inserting 5 years:

(e)

Effective date

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

1403.

Repeal of exclusion, etc., for employee achievement awards

(a)

In general

Section 74 is amended by striking subsection (c).

(b)

Repeal of limitation on deduction

Section 274 is amended by striking subsection (j).

(c)

Conforming amendments

(1)

Section 102(c)(2) is amended by striking the first sentence.

(2)

Section 414(n)(3)(C) is amended by striking 274(j),.

(3)

Section 414(t)(2) is amended by striking 274(j),.

(4)

Section 3121(a)(20) is amended by striking 74(c).

(5)

Section 3231(e)(5) is amended by striking 74(c),.

(6)

Section 3306(b)(16) is amended by striking 74(c),.

(7)

Section 3401(a)(19) is amended by striking 74(c),.

(d)

Effective date

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

1404.

Sunset of exclusion for dependent care assistance programs

(a)

In general

Section 129 is amended by adding at the end the following new subsection:

(f)

Termination

Subsection (a) shall not apply to taxable years beginning after December 31, 2022.

.

(b)

Effective date

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

1405.

Repeal of exclusion for qualified moving expense reimbursement

(a)

In general

Section 132(a) is amended by striking paragraph (6).

(b)

Conforming amendments

(1)

Section 82 is amended by striking Except as provided in section 132(a)(6), there and inserting There.

(2)

Section 132 is amended by striking subsection (g).

(3)

Section 132(l) is amended by striking by striking subsections (e) and (g) and inserting subsection (e).

(c)

Effective date

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

1406.

Repeal of exclusion for adoption assistance programs

(a)

In general

Part III of subchapter B of chapter 1 is amended by striking section 137 (and by striking the item relating to such section in the table of sections for such part).

(b)

Conforming amendments

(1)

Sections 414(n)(3)(C), 414(t)(2), 74(d)(2)(B), 86(b)(2)(A), 219(g)(3)(A)(ii) are each amended by striking , 137.

(2)

Section 1016(a), as amended by the preceding provision of this Act, is amended by striking paragraph (26).

(3)

Section 6039D(d)(1), as amended by the preceding provisions of this Act, is amended—

(A)

by striking , or 137, and

(B)

by inserting or before 125.

(c)

Effective date

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

F

Simplification and reform of savings, pensions, retirement

1501.

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.

1502.

Reduction in minimum age for allowable in-service distributions

(a)

In general

Section 401(a)(36) is amended by striking age 62 and inserting age 59 ½.

(b)

Application to governmental section 457(b) plans

Clause (i) of section 457(d)(1)(A) is amended by inserting (in the case of a plan maintained by an employer described in subsection (e)(1)(A), age 59 ½) before the comma at the end.

(c)

Effective date

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

1503.

Modification of rules governing hardship distributions

(a)

In general

Not later than 1 year after the date of the enactment of this Act, the Secretary of the Treasury shall modify Treasury Regulation section 1.401(k)–1(d)(3)(iv)(E) to—

(1)

delete the 6-month prohibition on contributions imposed by paragraph (2) thereof, and

(2)

make any other modifications necessary to carry out the purposes of section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986.

(b)

Effective date

The revised regulations under this section shall apply to plan years beginning after December 31, 2017.

1504.

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

(a)

In general

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.".

.

(b)

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".

.

(c)

Effective date

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

1505.

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

(a)

In general

Paragraph (3) of section 402(c) is amended by adding at the end the following new subparagraph:

(C)

Rollover of certain plan loan offset amounts

(i)

In general

In the case of a qualified plan loan offset amount, paragraph (1) shall not apply to any transfer of such amount made after the due date (including extensions) for filing the return of tax for the taxable year in which such amount is treated as distributed from a qualified employer plan.

(ii)

Qualified plan loan offset amount

For purposes of this subparagraph, the term qualified plan loan offset amount means a plan loan offset amount which is treated as distributed from a qualified employer plan to a participant or beneficiary solely by reason of—

(I)

the termination of the qualified employer plan, or

(II)

the failure to meet the repayment terms of the loan from such plan because of the separation from service of the participant (whether due to layoff, cessation of business, termination of employment, or otherwise).

(iii)

Plan loan offset amount

For purposes of clause (ii), the term plan loan offset amount means the amount by which the participant's accrued benefit under the plan is reduced in order to repay a loan from the plan.

(iv)

Limitation

This subparagraph shall not apply to any plan loan offset amount unless such plan loan offset amount relates to a loan to which section 72(p)(1) does not apply by reason of section 72(p)(2).

(v)

Qualified employer plan

For purposes of this subsection, the term qualified employer plan has the meaning given such term by section 72(p)(4).

.

(b)

Conforming amendment

Subparagraph (A) of section 402(c)(3) is amended by striking subparagraph (B) and inserting subparagraphs (B) and (C).

(c)

Effective date

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

1506.

Modification of nondiscrimination rules to protect older, longer service participants

(a)

In general

Section 401 is amended—

(1)

by redesignating subsection (o) as subsection (p), and

(2)

by inserting after subsection (n) the following new subsection:

(o)

Special rules for applying nondiscrimination rules to protect older, longer service and grandfathered participants

(1)

Testing of defined benefit plans with closed classes of participants

(A)

Benefits, rights, or features provided to closed classes

A defined benefit plan which provides benefits, rights, or features to a closed class of participants shall not fail to satisfy the requirements of subsection (a)(4) by reason of the composition of such closed class or the benefits, rights, or features provided to such closed class, if—

(i)

for the plan year as of which the class closes and the 2 succeeding plan years, such benefits, rights, and features satisfy the requirements of subsection (a)(4) (without regard to this subparagraph but taking into account the rules of subparagraph (I)),

(ii)

after the date as of which the class was closed, any plan amendment which modifies the closed class or the benefits, rights, and features provided to such closed class does not discriminate significantly in favor of highly compensated employees, and

(iii)

the class was closed before April 5, 2017, or the plan is described in subparagraph (C).

(B)

Aggregate testing with defined contribution plans permitted on a benefits basis

(i)

In general

For purposes of determining compliance with subsection (a)(4) and section 410(b), a defined benefit plan described in clause (iii) may be aggregated and tested on a benefits basis with 1 or more defined contribution plans, including with the portion of 1 or more defined contribution plans which—

(I)

provides matching contributions (as defined in subsection (m)(4)(A)),

(II)

provides annuity contracts described in section 403(b) which are purchased with matching contributions or nonelective contributions, or

(III)

consists of an employee stock ownership plan (within the meaning of section 4975(e)(7)) or a tax credit employee stock ownership plan (within the meaning of section 409(a)).

(ii)

Special rules for matching contributions

For purposes of clause (i), if a defined benefit plan is aggregated with a portion of a defined contribution plan providing matching contributions—

(I)

such defined benefit plan must also be aggregated with any portion of such defined contribution plan which provides elective deferrals described in subparagraph (A) or (C) of section 402(g)(3), and

(II)

such matching contributions shall be treated in the same manner as nonelective contributions, including for purposes of applying the rules of subsection (l).

(iii)

Plans described

A defined benefit plan is described in this clause if—

(I)

the plan provides benefits to a closed class of participants,

(II)

for the plan year as of which the class closes and the 2 succeeding plan years, the plan satisfies the requirements of section 410(b) and subsection (a)(4) (without regard to this subparagraph but taking into account the rules of subparagraph (I)),

(III)

after the date as of which the class was closed, any plan amendment which modifies the closed class or the benefits provided to such closed class does not discriminate significantly in favor of highly compensated employees, and

(IV)

the class was closed before April 5, 2017, or the plan is described in subparagraph (C).

(C)

Plans described

A plan is described in this subparagraph if, taking into account any predecessor plan—

(i)

such plan has been in effect for at least 5 years as of the date the class is closed, and

(ii)

during the 5-year period preceding the date the class is closed, there has not been a substantial increase in the coverage or value of the benefits, rights, or features described in subparagraph (A) or in the coverage or benefits under the plan described in subparagraph (B)(iii) (whichever is applicable).

(D)

Determination of substantial increase for benefits, rights, and features

In applying subparagraph (C)(ii) for purposes of subparagraph (A)(iii), a plan shall be treated as having had a substantial increase in coverage or value of the benefits, rights, or features described in subparagraph (A) during the applicable 5-year period only if, during such period—

(i)

the number of participants covered by such benefits, rights, or features on the date such period ends is more than 50 percent greater than the number of such participants on the first day of the plan year in which such period began, or

(ii)

such benefits, rights, and features have been modified by 1 or more plan amendments in such a way that, as of the date the class is closed, the value of such benefits, rights, and features to the closed class as a whole is substantially greater than the value as of the first day of such 5-year period, solely as a result of such amendments.

(E)

Determination of substantial increase for aggregate testing on benefits basis

In applying subparagraph (C)(ii) for purposes of subparagraph (B)(iii)(IV), a plan shall be treated as having had a substantial increase in coverage or benefits during the applicable 5-year period only if, during such period—

(i)

the number of participants benefitting under the plan on the date such period ends is more than 50 percent greater than the number of such participants on the first day of the plan year in which such period began, or

(ii)

the average benefit provided to such participants on the date such period ends is more than 50 percent greater than the average benefit provided on the first day of the plan year in which such period began.

(F)

Certain employees disregarded

For purposes of subparagraphs (D) and (E), any increase in coverage or value or in coverage or benefits, whichever is applicable, which is attributable to such coverage and value or coverage and benefits provided to employees—

(i)

who became participants as a result of a merger, acquisition, or similar event which occurred during the 7-year period preceding the date the class is closed, or

(ii)

who became participants by reason of a merger of the plan with another plan which had been in effect for at least 5 years as of the date of the merger,

shall be disregarded, except that clause (ii) shall apply for purposes of subparagraph (D) only if, under the merger, the benefits, rights, or features under 1 plan are conformed to the benefits, rights, or features of the other plan prospectively.
(G)

Rules relating to average benefit

For purposes of subparagraph (E)—

(i)

the average benefit provided to participants under the plan will be treated as having remained the same between the 2 dates described in subparagraph (E)(ii) if the benefit formula applicable to such participants has not changed between such dates, and

(ii)

if the benefit formula applicable to 1 or more participants under the plan has changed between such 2 dates, then the average benefit under the plan shall be considered to have increased by more than 50 percent only if—

(I)

the total amount determined under section 430(b)(1)(A)(i) for all participants benefitting under the plan for the plan year in which the 5-year period described in subparagraph (E) ends, exceeds

(II)

the total amount determined under section 430(b)(1)(A)(i) for all such participants for such plan year, by using the benefit formula in effect for each such participant for the first plan year in such 5-year period, by more than 50 percent.

In the case of a CSEC plan (as defined in section 414(y)), the normal cost of the plan (as determined under section 433(j)(1)(B)) shall be used in lieu of the amount determined under section 430(b)(1)(A)(i).
(H)

Treatment as single plan

For purposes of subparagraphs (E) and (G), a plan described in section 413(c) shall be treated as a single plan rather than as separate plans maintained by each participating employer.

(I)

Special rules

For purposes of subparagraphs (A)(i) and (B)(iii)(II), the following rules shall apply:

(i)

In applying section 410(b)(6)(C), the closing of the class of participants shall not be treated as a significant change in coverage under section 410(b)(6)(C)(i)(II).

(ii)

2 or more plans shall not fail to be eligible to be aggregated and treated as a single plan solely by reason of having different plan years.

(iii)

Changes in the employee population shall be disregarded to the extent attributable to individuals who become employees or cease to be employees, after the date the class is closed, by reason of a merger, acquisition, divestiture, or similar event.

(iv)

Aggregation and all other testing methodologies otherwise applicable under subsection (a)(4) and section 410(b) may be taken into account.

The rule of clause (ii) shall also apply for purposes of determining whether plans to which subparagraph (B)(i) applies may be aggregated and treated as 1 plan for purposes of determining whether such plans meet the requirements of subsection (a)(4) and section 410(b).
(J)

Spun-off plans

For purposes of this paragraph, if a portion of a defined benefit plan described in subparagraph (A) or (B)(iii) is spun off to another employer and the spun-off plan continues to satisfy the requirements of—

(i)

subparagraph (A)(i) or (B)(iii)(II), whichever is applicable, if the original plan was still within the 3-year period described in such subparagraph at the time of the spin off, and

(ii)

subparagraph (A)(ii) or (B)(iii)(III), whichever is applicable,

the treatment under subparagraph (A) or (B) of the spun-off plan shall continue with respect to such other employer.
(2)

Testing of defined contribution plans

(A)

Testing on a benefits basis

A defined contribution plan shall be permitted to be tested on a benefits basis if—

(i)

such defined contribution plan provides make-whole contributions to a closed class of participants whose accruals under a defined benefit plan have been reduced or eliminated,

(ii)

for the plan year of the defined contribution plan as of which the class eligible to receive such make-whole contributions closes and the 2 succeeding plan years, such closed class of participants satisfies the requirements of section 410(b)(2)(A)(i) (determined by applying the rules of paragraph (1)(I)),

(iii)

after the date as of which the class was closed, any plan amendment to the defined contribution plan which modifies the closed class or the allocations, benefits, rights, and features provided to such closed class does not discriminate significantly in favor of highly compensated employees, and

(iv)

the class was closed before April 5, 2017, or the defined benefit plan under clause (i) is described in paragraph (1)(C) (as applied for purposes of paragraph (1)(B)(iii)(IV)).

(B)

Aggregation with plans including matching contributions

(i)

In general

With respect to 1 or more defined contribution plans described in subparagraph (A), for purposes of determining compliance with subsection (a)(4) and section 410(b), the portion of such plans which provides make-whole contributions or other nonelective contributions may be aggregated and tested on a benefits basis with the portion of 1 or more other defined contribution plans which—

(I)

provides matching contributions (as defined in subsection (m)(4)(A)),

(II)

provides annuity contracts described in section 403(b) which are purchased with matching contributions or nonelective contributions, or

(III)

consists of an employee stock ownership plan (within the meaning of section 4975(e)(7)) or a tax credit employee stock ownership plan (within the meaning of section 409(a)).

(ii)

Special rules for matching contributions

Rules similar to the rules of paragraph (1)(B)(ii) shall apply for purposes of clause (i).

(C)

Special rules for testing defined contribution plan features providing matching contributions to certain older, longer service participants

In the case of a defined contribution plan which provides benefits, rights, or features to a closed class of participants whose accruals under a defined benefit plan have been reduced or eliminated, the plan shall not fail to satisfy the requirements of subsection (a)(4) solely by reason of the composition of the closed class or the benefits, rights, or features provided to such closed class if the defined contribution plan and defined benefit plan otherwise meet the requirements of subparagraph (A) but for the fact that the make-whole contributions under the defined contribution plan are made in whole or in part through matching contributions.

(D)

Spun-off plans

For purposes of this paragraph, if a portion of a defined contribution plan described in subparagraph (A) or (C) is spun off to another employer, the treatment under subparagraph (A) or (C) of the spun-off plan shall continue with respect to the other employer if such plan continues to comply with the requirements of clauses (ii) (if the original plan was still within the 3-year period described in such clause at the time of the spin off) and (iii) of subparagraph (A), as determined for purposes of subparagraph (A) or (C), whichever is applicable.

(3)

Definitions

For purposes of this subsection—

(A)

Make-whole contributions

Except as otherwise provided in paragraph (2)(C), the term make-whole contributions means nonelective allocations for each employee in the class which are reasonably calculated, in a consistent manner, to replace some or all of the retirement benefits which the employee would have received under the defined benefit plan and any other plan or qualified cash or deferred arrangement under subsection (k)(2) if no change had been made to such defined benefit plan and such other plan or arrangement. For purposes of the preceding sentence, consistency shall not be required with respect to employees who were subject to different benefit formulas under the defined benefit plan.

(B)

References to closed class of participants

References to a closed class of participants and similar references to a closed class shall include arrangements under which 1 or more classes of participants are closed, except that 1 or more classes of participants closed on different dates shall not be aggregated for purposes of determining the date any such class was closed.

(C)

Highly compensated employee

The term highly compensated employee has the meaning given such term in section 414(q).".

.

(b)

Participation requirements

Paragraph (26) of section 401(a) is amended by adding at the end the following new subparagraph:

(I)

Protected participants

(i)

In general

A plan shall be deemed to satisfy the requirements of subparagraph (A) if—

(I)

the plan is amended—

(aa)

to cease all benefit accruals, or

(bb)

to provide future benefit accruals only to a closed class of participants,

(II)

the plan satisfies subparagraph (A) (without regard to this subparagraph) as of the effective date of the amendment, and

(III)

the amendment was adopted before April 5, 2017, or the plan is described in clause (ii).

(ii)

Plans described

A plan is described in this clause if the plan would be described in subsection (o)(1)(C), as applied for purposes of subsection (o)(1)(B)(iii)(IV) and by treating the effective date of the amendment as the date the class was closed for purposes of subsection (o)(1)(C).

(iii)

Special rules

For purposes of clause (i)(II), in applying section 410(b)(6)(C), the amendments described in clause (i) shall not be treated as a significant change in coverage under section 410(b)(6)(C)(i)(II).

(iv)

Spun-off plans

For purposes of this subparagraph, if a portion of a plan described in clause (i) is spun off to another employer, the treatment under clause (i) of the spun-off plan shall continue with respect to the other employer.

.

(c)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall take effect on the date of the enactment of this Act, without regard to whether any plan modifications referred to in such amendments are adopted or effective before, on, or after such date of enactment.

(2)

Special rules

(A)

Election of earlier application

At the election of the plan sponsor, the amendments made by this section shall apply to plan years beginning after December 31, 2013.

(B)

Closed classes of participants

For purposes of paragraphs (1)(A)(iii), (1)(B)(iii)(IV), and (2)(A)(iv) of section 401(o) of the Internal Revenue Code of 1986 (as added by this section), a closed class of participants shall be treated as being closed before April 5, 2017, if the plan sponsor’s intention to create such closed class is reflected in formal written documents and communicated to participants before such date.

(C)

Certain post-enactment plan amendments

A plan shall not be treated as failing to be eligible for the application of section 401(o)(1)(A), 401(o)(1)(B)(iii), or 401(a)(26) of such Code (as added by this section) to such plan solely because in the case of—

(i)

such section 401(o)(1)(A), the plan was amended before the date of the enactment of this Act to eliminate 1 or more benefits, rights, or features, and is further amended after such date of enactment to provide such previously eliminated benefits, rights, or features to a closed class of participants, or

(ii)

such section 401(o)(1)(B)(iii) or section 401(a)(26), the plan was amended before the date of the enactment of this Act to cease all benefit accruals, and is further amended after such date of enactment to provide benefit accruals to a closed class of participants. Any such section shall only apply if the plan otherwise meets the requirements of such section and in applying such section, the date the class of participants is closed shall be the effective date of the later amendment.

G

Estate, gift, and generation-skipping transfer taxes

1601.

Increase in credit against estate, gift, and generation-skipping transfer tax

(a)

In general

Section 2010(c)(3) is amended by striking $5,000,000 and inserting $10,000,000.

(b)

Effective date

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

1602.

Repeal of estate and generation-skipping transfer taxes

(a)

Estate tax repeal

(1)

In general

Subchapter C of chapter 11 is amended by adding at the end the following new section:

2210.

Termination

(a)

In general

Except as provided in subsection (b), this chapter shall not apply to the estates of decedents dying after December 31, 2024.

(b)

Certain Distributions From Qualified Domestic Trusts

In applying section 2056A with respect to the surviving spouse of a decedent dying on or before December 31, 2024—

(1)

section 2056A(b)(1)(A) shall not apply to distributions made after the 10-year period beginning on such date, and

(2)

section 2056A(b)(1)(B) shall not apply after such date.

.

(2)

Conforming amendments

Section 1014(b) is amended—

(A)

in paragraph (6), by striking was includible in determining and all that follows through the end and inserting was includible (or would have been includible without regard to section 2210) in determining the value of the decedent’s gross estate under chapter 11 of subtitle B ,

(B)

in paragraph (9), by striking required to be included through Code of 1939 and inserting required to be included (or would have been required to be included without regard to section 2210) in determining the value of the decedent’s gross estate under chapter 11 of subtitle B, and

(C)

in paragraph (10), by striking Property includible in the gross estate and inserting Property includible (or which would have been includible without regard to section 2210) in the gross estate.

(3)

Clerical amendment

The table of sections for subchapter C of chapter 11 is amended by adding at the end the following new item:

Sec. 2210. Termination.

.

(b)

Generation-skipping transfer tax repeal

(1)

In general

Subchapter G of chapter 13 of subtitle B of such Code is amended by adding at the end the following new section:

2664.

Termination

This chapter shall not apply to generation-skipping transfers after December 31, 2024.

.

(2)

Clerical amendment

The table of sections for subchapter G of chapter 13 of such Code is amended by adding at the end the following new item:

Sec. 2664. Termination.

.

(c)

Conforming amendments related to gift tax

(1)

Computation of gift tax

Section 2502 is amended by adding at the end the following new subsection:

(d)

Gifts made after 2024

(1)

In general

In the case of a gift made after December 31, 2024, subsection (a) shall be applied by substituting subsection (d)(2) for section 2001(c) and such subsection for such section.

(2)

Rate schedule

If the amount with respect to which the tentative tax to be computed is:The tentative tax is:
Not over $10,00018% of such amount.
Over $10,000 but not over $20,000$1,800, plus 20% of the excess over $10,000.
Over $20,000 but not over $40,000$3,800, plus 22% of the excess over $20,000.
Over $40,000 but not over $60,000$8,200, plus 24% of the excess over $40,000.
Over $60,000 but not over $80,000$13,000, plus 26% of the excess over $60,000.
Over $80,000 but not over $100,000$18,200, plus 28% of the excess over $80,000.
Over $100,000 but not over $150,000$23,800, plus 30% of the excess over $100,000.
Over $150,000 but not over $250,000$38,800, plus 32% of the excess of $150,000.
Over $250,000 but not over $500,000$70,800, plus 34% of the excess over $250,000.
Over $500,000$155,800, plus 35% of the excess of $500,000.

.

(2)

Lifetime gift exemption

Section 2505 is amended by adding at the end the following new subsection:

(d)

Gifts made after 2024

(1)

In general

In the case of a gift made after December 31, 2024, subsection (a)(1) shall be applied by substituting the amount of the tentative tax which would be determined under the rate schedule set forth in section 2502(a)(2) if the amount with respect to which such tentative tax is to be computed were $10,000,000 for the applicable credit amount in effect under section 2010(c) which would apply if the donor died as of the end of the calendar year.

(2)

Inflation adjustment

(A)

In general

In the case of any calendar year after 2024, the dollar amount in subsection (a)(1) (after application of this subsection) shall be increased by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under section 1(c)(2)(A) of such calendar year by substituting calendar year 2011 for calendar year 2016 in clause (ii) thereof.

(B)

Rounding

If any amount as adjusted under paragraph (1) is not a multiple of $10,000, such amount shall be rounded to the nearest multiple of $10,000.

.

(3)

Other conforming amendments related to gift tax

Section 2801 is amended by adding at the end the following new subsection:

(g)

Gifts received after 2024

In the case of a gift received after December 31, 2024, subsection (a)(1) shall be applied by substituting section 2502(a)(2) for section 2001(c) as in effect on the date of such receipt.

.

(d)

Effective date

The amendments made by this section shall apply to estates of decedents dying, generation-skipping transfers, and gifts made, after December 31, 2024.

II

Alternative Minimum Tax Repeal

2001.

Repeal of alternative minimum tax

(a)

In general

Subchapter A of chapter 1 is amended by striking part VI (and by striking the item relating to such part in the table of parts for subchapter A).

(b)

Credit for prior year minimum tax liability

(1)

Limitation

Subsection (c) of section 53 is amended to read as follows:

(c)

Limitation

The credit allowable under subsection (a) shall not exceed the regular tax liability of the taxpayer reduced by the sum of the credits allowed under subparts A, B, and D.

.

(2)

Credits treated as refundable

Section 53 is amended by adding at the end the following new subsection:

(e)

Portion of credit treated as refundable

(1)

In general

In the case of any taxable year beginning in 2019, 2020, 2021, or 2022, the limitation under subsection (c) shall be increased by the AMT refundable credit amount for such year.

(2)

AMT refundable credit amount

For purposes of paragraph (1), the AMT refundable credit amount is an amount equal to 50 percent (100 percent in the case of a taxable year beginning in 2022) of the excess (if any) of—

(A)

the minimum tax credit determined under subsection (b) for the taxable year, over

(B)

the minimum tax credit allowed under subsection (a) for such year (before the application of this subsection for such year).

(3)

Credit refundable

For purposes of this title (other than this section), the credit allowed by reason of this subsection shall be treated as a credit allowed under subpart C (and not this subpart).

(4)

Short taxable years

In the case of any taxable year of less than 365 days, the AMT refundable credit amount determined under paragraph (2) with respect to such taxable year shall be the amount which bears the same ratio to such amount determined without regard to this paragraph as the number of days in such taxable year bears to 365.

.

(3)

Treatment of references

Section 53(d) is amended by adding at the end the following new paragraph:

(3)

AMT term references

Any references in this subsection to section 55, 56, or 57 shall be treated as a reference to such section as in effect before its repeal by the Tax Cuts and Jobs Act.

.

(c)

Conforming amendments related to AMT repeal

(1)

Section 2(d) is amended by striking sections 1 and 55 and inserting section 1.

(2)

Section 5(a) is amended by striking paragraph (4).

(3)

Section 11(d) is amended by striking the taxes imposed by subsection (a) and section 55 and inserting the tax imposed by subsection (a).

(4)

Section 12 is amended by striking paragraph (7).

(5)

Section 26(a) is amended to read as follows:

(a)

Limitation based on amount of tax

The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the taxpayer’s regular tax liability for the taxable year.

.

(6)

Section 26(b)(2) is amended by striking subparagraph (A).

(7)

Section 26 is amended by striking subsection (c).

(8)

Section 38(c) is amended—

(A)

by striking paragraphs (1) through (5),

(B)

by redesignating paragraph (6) as paragraph (2),

(C)

by inserting before paragraph (2) (as so redesignated) the following new paragraph:

(1)

In general

The credit allowed under subsection (a) for any taxable year shall not exceed the excess (if any) of—

(A)

the sum of—

(i)

so much of the regular tax liability as does not exceed $25,000, plus

(ii)

75 percent of so much of the regular tax liability as exceeds $25,000, over

(B)

the sum of the credits allowable under subparts A and B of this part.

, and

(D)

by striking subparagraph (B) of paragraph (1) each place it appears in paragraph (2) (as so redesignated) and inserting clauses (i) and (ii) of paragraph (1)(A).

(9)

Section 39(a) is amended—

(A)

by striking or the eligible small business credits in paragraph (3)(A), and

(B)

by striking paragraph (4).

(10)

Section 45D(g)(4)(B) is amended by striking or for purposes of section 55.

(11)

Section 54(c)(1) is amended to read as follows:

(1)

regular tax liability (as defined in section 26(b)), over

.

(12)

Section 54A(c)(1)(A) is amended to read as follows:

(A)

regular tax liability (as defined in section 26(b)), over

.

(13)

Section 148(b)(3) is amended to read as follows:

(3)

Tax-exempt bonds not treated as investment property

The term investment property does not include any tax-exempt bond.

.

(14)

Section 168(k)(2) is amended by striking subparagraph (G).

(15)

Section 168(k) is amended by striking paragraph (4).

(16)

Section 168(k)(5) is amended by striking subparagraph (E).

(17)

Section 168(m)(2)(B)(i) is amended by striking (determined without regard to paragraph (4) thereof).

(18)

Section 168(m)(2) is amended by striking subparagraph (D).

(19)

Section 173 is amended by striking subsection (b).

(20)

Section 263(c) is amended by striking section 59(e) or 291 and inserting section 291.

(21)

Section 263A(c) is amended by striking paragraph (6) and by redesignating paragraph (7) (as amended) as paragraph (6).

(22)

Section 382(l) is amended by striking paragraph (7) and by redesignating paragraph (8) as paragraph (7).

(23)

Section 443 is amended by striking subsection (d) and by redesignating subsection (e) as subsection (d).

(24)

Section 616 is amended by striking subsection (e).

(25)

Section 617 is amended by striking subsection (i).

(26)

Section 641(c) is amended—

(A)

in paragraph (2) by striking subparagraph (B) and by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively, and

(B)

in paragraph (3), by striking paragraph (2)(C) and inserting paragraph (2)(B).

(27)

Subsections (b) and (c) of section 666 are each amended by striking (other than the tax imposed by section 55).

(28)

Section 848 is amended by striking subsection (i).

(29)

Section 860E(a) is amended by striking paragraph (4).

(30)

Section 871(b)(1) is amended by striking or 55.

(31)

Section 882(a)(1) is amended by striking 55,.

(32)

Section 897(a) is amended to read as follows:

(a)

Treatment as effectively connected with united states trade or business

For purposes of this title, gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a United States real property interest shall be taken into account—

(1)

in the case of a nonresident alien individual, under section 871(b)(1), or

(2)

in the case of a foreign corporation, under section 882(a)(1),

as if the taxpayer were engaged in a trade or business within the United States during the taxable year and as if such gain or loss were effectively connected with such trade or business.

.

(33)

Section 904(k) is amended to read as follows:

(k)

Cross reference

For increase of limitation under subsection (a) for taxes paid with respect to amounts received which were included in the gross income of the taxpayer for a prior taxable year as a United States shareholder with respect to a controlled foreign corporation, see section 960(b).

.

(34)

Section 911(f) is amended to read as follows:

(f)

Determination of tax liability

(1)

In general

If, for any taxable year, any amount is excluded from gross income of a taxpayer under subsection (a), then, notwithstanding section 1, if such taxpayer has taxable income for such taxable year, the tax imposed by section 1 for such taxable year shall be equal to the excess (if any) of—

(A)

the tax which would be imposed by section 1 for such taxable year if the taxpayer’s taxable income were increased by the amount excluded under subsection (a) for such taxable year, over

(B)

the tax which would be imposed by section 1 for such taxable year if the taxpayer’s taxable income were equal to the amount excluded under subsection (a) for such taxable year.

For purposes of this paragraph, the amount excluded under subsection (a) shall be reduced by the aggregate amount of any deductions or exclusions disallowed under subsection (d)(6) with respect to such excluded amount.
(2)

Treatment of capital gain excess

(A)

In general

In applying section 1(h) for purposes of determining the tax under paragraph (1)(A) for any taxable year in which, without regard to this subsection, the taxpayer’s net capital gain exceeds taxable income (hereafter in this subparagraph referred to as the capital gain excess)—

(i)

the taxpayer’s net capital gain (determined without regard to section 1(h)(11)) shall be reduced (but not below zero) by such capital gain excess,

(ii)

the taxpayer’s qualified dividend income shall be reduced by so much of such capital gain excess as exceeds the taxpayer’s net capital gain (determined without regard to section 1(h)(11) and the reduction under clause (i)), and

(iii)

adjusted net capital gain, unrecaptured section 1250 gain, and 28-percent rate gain shall each be determined after increasing the amount described in section 1(h)(4)(B) by such capital gain excess.

(B)

Definitions

Terms used in this paragraph which are also used in section 1(h) shall have the respective meanings given such terms by section 1(h).

.

(35)

Section 962(a)(1) is amended—

(A)

by striking sections 1 and 55 and inserting section 1, and

(B)

by striking sections 11 and 55 and inserting section 11.

(36)

Section 1016(a) is amended by striking paragraph (20).

(37)

Section 1202(a)(4) is amended by inserting and at the end of subparagraph (A), by striking , and and inserting a period at the end of subparagraph (B), and by striking subparagraph (C).

(38)

Section 1374(b)(3)(B) is amended by striking the last sentence thereof.

(39)

Section 1561(a) is amended—

(A)

by inserting and at the end of paragraph (1), by striking , and at the end of paragraph (2) and inserting a period, and by striking paragraph (3), and

(B)

by striking the last sentence.

(40)

Section 6015(d)(2)(B) is amended by striking or 55.

(41)

Section 6211(b)(4)(A) is amended by striking, 168(k)(4).

(42)

Section 6425(c)(1)(A) is amended to read as follows:

(A)

the tax imposed under section 11 or subchapter L of chapter 1, whichever is applicable, over

.

(43)

Section 6654(d)(2) is amended—

(A)

in clause (i) of subparagraph (B), by striking , alternative minimum taxable income,, and

(B)

in clause (i) of subparagraph (C), by striking , alternative minimum taxable income,.

(44)

Section 6655(e)(2)(B)(i) is amended by striking The taxable income and alternative minimum taxable income shall and inserting Taxable income shall.

(45)

Section 6655(g)(1)(A) is amended by adding plus at the end of clause (i), by striking clause (ii), and by redesignating clause (iii) as clause (ii).

(46)

Section 6662(e)(3)(C) is amended by striking the regular tax (as defined in section 55(c)) and inserting the regular tax liability (as defined in section 26(b)).

(d)

Effective dates

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.

(2)

Prior elections with respect to certain tax preferences

So much of the amendment made by subsection (a) as relates to the repeal of section 59(e) of the Internal Revenue Code of 1986 shall apply to amounts paid or incurred after December 31, 2017.

(3)

Treatment of net operating loss carrybacks

For purposes of section 56(d) of the Internal Revenue Code of 1986 (as in effect before its repeal), the amount of any net operating loss which may be carried back from a taxable year beginning after December 31, 2017, to taxable years beginning before January 1, 2018, shall be determined without regard to any adjustments under section 56(d)(2)(A) of such Code (as so in effect).

III

Business tax reform

A

Tax rates

3001.

Reduction in corporate tax rate

(a)

In general

Section 11(b) is amended to read as follows:

(b)

Amount of tax

(1)

In general

Except as otherwise provided in this subsection, the amount of the tax imposed by subsection (a) shall be 20 percent of taxable income.

(2)

Special rule for personal service corporations

(A)

In general

In the case of a personal service corporation (as defined in section 448(d)(2)), the amount of the tax imposed by subsection (a) shall be 25 percent of taxable income.

(B)

References to corporate rate

Any reference to the rate imposed under this section or to the highest rate in effect under this section (or any similar reference) shall be determined without regard to the rate imposed with respect to personal service corporations (as so defined).

.

(b)

Conforming amendments

(1)
(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 paragraph (4).

(C)

Section 527(b) is amended—

(i)

by striking paragraph (2), and

(ii)

by striking all that precedes is hereby imposed and inserting:

(b)

Tax imposed

A tax

.

(D)

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

(E)

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

(F)

Section 801(a) is amended—

(i)

by striking paragraph (2), and

(ii)

by striking all that precedes is hereby imposed and inserting:

(a)

Tax imposed

A tax

.

(G)

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

(H)

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

(I)

Section 852(b)(3)(A) is amended by striking section 1201(a) and inserting section 11(b)(1).

(J)

Section 857(b)(3) is amended—

(i)

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

(ii)

in subparagraph (C), as so redesignated—

(I)

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

(II)

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

(iii)

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

(iv)

by adding at the end the following new subparagraph:

(F)

Undistributed capital gain

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

.

(K)

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

(L)

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

(M)

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

(N)

Section 6655(g)(1)(A)(i) is amended by striking or 1201(a),.

(O)

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

(2)

Section 1445(e)(1) is amended by striking 35 percent (or, to the extent provided in regulations, 20 percent) and inserting 20 percent.

(3)

Section 1445(e)(2) is amended by striking 35 percent and inserting 20 percent.

(4)

Section 1445(e)(6) is amended by striking 35 percent (or, to the extent provided in regulations, 20 percent) and inserting 20 percent.

(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 12 is amended by striking paragraph (6).

(C)

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

(5)

Cross reference

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

.

(6)
(A)

Section 1561, as amended by the preceding provisions of this Act, is amended to read as follows:

1561.

Limitation on accumulated earnings credit in the case of certain controlled corporations

(a)

In general

The component members of a controlled group of corporations on a December 31 shall, for their taxable years which include such December 31, be limited for purposes of this subtitle to one $250,000 ($150,000 if any component member is a corporation described in section 535(c)(2)(B)) amount for purposes of computing the accumulated earnings credit under section 535(c)(2) and (3). Such amount shall be divided equally among the component members of such group on such December 31 unless the Secretary prescribes regulations permitting an unequal allocation of such amount.

(b)

Certain short taxable years

If a corporation has a short taxable year which does not include a December 31 and is a component member of a controlled group of corporations with respect to such taxable year, then for purposes of this subtitle, the amount to be used in computing the accumulated earnings credit under section 535(c)(2) and (3) of such corporation for such taxable year shall be the amount specified in subsection (a) with respect to such group, divided by the number of corporations which are component members of such group on the last day of such taxable year. For purposes of the preceding sentence, section 1563(b) shall be applied as if such last day were substituted for December 31.

.

(B)

The table of sections for part II of subchapter B of chapter 5 is amended by striking the item relating to section 1561 and inserting the following new item:

Sec. 1561. Limitation on accumulated earnings credit in the case of certain controlled corporations.

.

(7)

Section 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)

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

(1)

Dividends received by corporations

(A)

In general

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

(B)

Dividends from 20-percent owned corporations

Section 243(c)(1) is amended—

(i)

by striking 80 percent and inserting 65 percent, and

(ii)

by striking 70 percent and inserting 50 percent.

(C)

Conforming amendment

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

(2)

Dividends received from FSC

Section 245(c)(1)(B) is amended—

(A)

by striking 70 percent and inserting 50 percent, and

(B)

by striking 80 percent and inserting 65 percent.

(3)

Limitation on aggregate amount of deductions

Section 246(b)(3) is amended—

(A)

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

(B)

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

(4)

Reduction in deduction where portfolio stock is debt-financed

Section 246A(a)(1) is amended—

(A)

by striking 70 percent and inserting 50 percent, and

(B)

by striking 80 percent and inserting 65 percent.

(5)

Income from sources within the United States

Section 861(a)(2) is amended—

(A)

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

(B)

in the flush sentence at the end—

(i)

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

(ii)

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

(d)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.

(2)

Certain conforming amendments

The amendments made by paragraphs (2), (3), and (4) of subsection (b) shall apply to distributions after December 31, 2017.

(e)

Normalization requirements

(1)

In general

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

(2)

Alternative Method for Certain Taxpayers

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

(A)

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

(B)

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

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

Definitions

For purposes of this subsection—

(A)

Excess tax reserve

The term excess tax reserve means the excess of—

(i)

the reserve for deferred taxes (as described in section 168(i)(9)(A)(ii) of the Internal Revenue Code of 1986 as in effect on the day before the date of the enactment of this Act), over

(ii)

the amount which would be the balance in such reserve if the amount of such reserve were determined by assuming that the corporate rate reductions provided in this Act were in effect for all prior periods.

(B)

Average rate assumption method

The average rate assumption method is the method under which the excess in the reserve for deferred taxes is reduced over the remaining lives of the property as used in its regulated books of account which gave rise to the reserve for deferred taxes. Under such method, if timing differences for the property reverse, the amount of the adjustment to the reserve for the deferred taxes is calculated by multiplying—

(i)

the ratio of the aggregate deferred taxes for the property to the aggregate timing differences for the property as of the beginning of the period in question, by

(ii)

the amount of the timing differences which reverse during such period.

(C)

Alternative method

The alternative method is the method in which the taxpayer—

(i)

computes the excess tax reserve on all public utility property included in the plant account on the basis of the weighted average life or composite rate used to compute depreciation for regulatory purposes, and

(ii)

reduces the excess tax reserve ratably over the remaining regulatory life of the property.

(4)

Tax increased for normalization violation

If, for any taxable year ending after the date of the enactment of this Act, the taxpayer does not use a normalization method of accounting, the taxpayer’s tax for the taxable year shall be increased by the amount by which it reduces its excess tax reserve more rapidly than permitted under a normalization method of accounting.

B

Cost recovery

3101.

Increased expensing

(a)

100 percent expensing

Section 168(k)(1)(A) is amended by striking 50 percent and inserting 100 percent.

(b)

Extension through January 1, 2023

Section 168(k)(2) is amended—

(1)

in subparagraph (A)(iii), by striking January 1, 2020 and inserting January 1, 2023,

(2)

in subparagraph (B)(i)(II), by striking January 1, 2021 and inserting January 1, 2024,

(3)

in subparagraph (B)(i)(III), by striking January 1, 2020 and inserting January 1, 2023,

(4)

in subparagraph (B)(ii), by striking January 1, 2020 in each place it appears and inserting January 1, 2023, and

(5)

in subparagraph (E)(i), by striking January 1, 2020 and replacing it with January 1, 2023.

(c)

Application to used property

(1)

In general

Section 168(k)(2)(A)(ii) is amended to read as follows:

(ii)

the original use of which begins with the taxpayer or the acquisition of which by the taxpayer meets the requirements of clause (ii) of subparagraph (E), and

.

(2)

Acquisition requirements

Section 168(k)(2)(E)(ii) is amended to read as follows:

(ii)

Acquisition requirements

An acquisition of property meets the requirements of this clause if—

(I)

such property was not used by the taxpayer at any time prior to such acquisition, and

(II)

the acquisition of such property meets the requirements of paragraphs (2)(A), (2)(B), (2)(C), and (3) of section 179(d).

,

(3)

Anti-abuse rules

Section 168(k)(2)(E) is further amended by amending clause (iii)(I) to read as follows:

(I)

property is used by a lessor of such property and such use is the lessor’s first use of such property,

.

(d)

Exception for certain trades and businesses not subject to limitation on interest expense

Section 168(k)(2), as amended by section 2001, is amended by inserting after subparagraph (F) the following new subparagraph:

(G)

Exception for property of certain businesses not subject to limitation on interest expense

The term qualified property shall not include any property used in—

(i)

a trade or business described in subparagraph (B) or (C) of section 163(j)(7), or

(ii)

a trade or business that has had floor plan financing indebtedness (as defined in paragraph (9) of section 163(j)), if the floor plan financing interest related to such indebtedness was taken into account under paragraph (1)(C) of such section.

.

(e)

Coordination with section 280F

Section 168(k)(2)(F) is amended—

(1)

by striking $8,000 in clauses (i) and (iii) and inserting $16,000, and

(2)

in clause (iii)—

(A)

by striking placed in service by the taxpayer after December 31, 2017 and inserting acquired by the taxpayer before September 28, 2017, and placed in service by the taxpayer after September 27, 2017, and

(B)

by redesignating subclauses (I) and (II) as subclauses (II) and (III) respectively, and inserting before clause (II), as so redesignated, the following new subclause:

(I)

in the case of a passenger automobile placed in service before January 1, 2018, $8,000,

.

(f)

Conforming amendments

(1)

Section 168(k)(2)(B)(i)(III), as amended, is amended by inserting binding before contract.

(2)

Section 168(k)(5) is amended by—

(A)

by striking January 1, 2020 in subparagraph (A) and inserting January 1, 2023,

(B)

by striking 50 percent in subparagraph (A)(i) and inserting 100 percent, and

(C)

by striking subparagraph (F).

(3)

Section 168(k)(6) is amended to read as follows:

(6)

Phase Down

In the case of qualified property acquired by the taxpayer before September 28, 2017, and placed in service by the taxpayer after September 27, 2017, paragraph (1)(A) shall be applied by substituting for 100 percent

(A)

50 percent in the case of—

(i)

property placed in service before January 1, 2018, and

(ii)

property described in subparagraph (B) or (C) of paragraph (2) which is placed in service in 2018,

(B)

40 percent in the case of—

(i)

property placed in service in 2018 (other than property described in subparagraph (B) or (C) of paragraph (2)), and

(ii)

property described in subparagraph (B) or (C) of paragraph (2) which is placed in service in 2019, and

(C)

30 percent in the case of—

(i)

property placed in service in 2019 (other than property described in subparagraph (B) or (C) of paragraph (2)), and

(ii)

property described in subparagraph (B) or (C) of paragraph (2) which is placed in service in 2020.

.

(4)

The heading of section 168(k) is amended by striking Special allowance for certain property acquired after December 31, 2007, and before January 1, 2020 and inserting Full expensing of certain property.

(5)

Section 460(c)(6)(B)(ii) is amended by striking January 1, 2020 (January 1, 2021 in the case of property described in section 168(k)(2)(B)) and inserting January 1, 2023 (January 1, 2024 in the case of property described in section 168(k)(2)(B)).

(g)

Effective date

(1)

In general

Except at provided by paragraph (2), the amendments made by this section shall apply to property which—

(A)

is acquired after September 27, 2017, and

(B)

is placed in service after such date.

For purposes of the preceding sentence, property shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition.
(2)

Specified plants

The amendments made by subsection (f)(2) shall apply to specified plants planted or grafted after September 27, 2017.

(3)

Transition rule

In the case of any taxpayer’s first taxable year ending after September 27, 2017, the taxpayer may elect (at such time and in such form and manner as the Secretary of the Treasury, or his designee, may provide) to apply section 168 of the Internal Revenue Code of 1986 without regard to the amendments made by this section.

(4)

Limitation on net operating loss carrybacks attributable to full expensing

In the case of any taxable year which includes any portion of the period beginning on September 28, 2017, and ending on December 31, 2017, the amount of any net operating loss for such taxable year which may be treated as a net operating loss carryback (including any such carryback attributable to any specified liability loss under section 172(b)(1)(C), any corporate equity reduction interest loss under section 172(b)(1)(D), any eligible loss under section 172(b)(1)(E), and any farming loss under section 172(b)(1)(F)) shall be determined without regard to the amendments made by this section. For purposes of this paragraph, terms which are used in section 172 of the Internal Revenue Code of 1986 (determined without regard to the amendments made by section 3302) shall have the same meaning as when used in such section.

C

Small business reforms

3201.

Expansion of section 179 expensing

(a)

Increased dollar limitations

(1)

In general

Section 179(b) is amended—

(A)

by inserting ($5,000,000, in the case of taxable years beginning before January 1, 2023) after $500,000 in paragraph (1), and

(B)

by inserting ($20,000,000, in the case of taxable years beginning before January 1, 2023) after $2,000,000 in paragraph (2).

(2)

Inflation adjustment

Section 179(b)(6) is amended to read as follows:

(6)

Inflation adjustment

(A)

In general

In the case of a taxable year beginning after 2015 (2018 in the case of the $5,000,000 and $20,000,000 amounts in subsection (b)), each dollar amount in subsection (b) shall be increased by an amount equal to such dollar amount multiplied by—

(i)

in the case of the $500,000 and $2,000,000 amounts in subsection (b), the cost-of-living adjustment determined under section 1(c)(2) for the calendar year in which the taxable year begins, determined by substituting calendar year 2014 for calendar year 2016 in subparagraph (A)(ii) thereof, and

(ii)

in the case of the $5,000,000 and $20,000,000 amounts in subsection (b), the cost-of-living adjustment determined under section 1(c)(2) for the calendar year in which the taxable year begins, determined by substituting calendar year 2017 for calendar year 2016 in subparagraph (A)(ii) thereof.

(B)

Rounding

The amount of any increase under subparagraph (A) shall be rounded to the nearest multiple of $10,000 ($100,000 in the case of the $5,000,000 and $20,000,000 amounts in subsection (b)).

.

(b)

Application to qualified energy efficient heating and air-conditioning property

(1)

In general

Section 179(f)(2) is amended by striking and at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting , and, and by adding at the end the following new subparagraph:

(D)

qualified energy efficient heating and air-conditioning property.

.

(2)

Qualified energy efficient heating and air-conditioning property

Section 179(f) is amended by adding at the end the following new paragraph:

(3)

Qualified energy efficient heating and air-conditioning property

For purposes of this subsection—

(A)

In general

The term qualified energy efficient heating and air-conditioning property means any section 1250 property—

(i)

with respect to which depreciation (or amortization in lieu of depreciation) is allowable,

(ii)

which is installed as part of a building’s heating, cooling, ventilation, or hot water system, and

(iii)

which is within the scope of Standard 90.1–2007 or any successor standard.

(B)

Standard 90.1–2007

The term Standard 90.1–2007 means Standard 90.1–2007 of the American Society of Heating, Refrigerating and Air-Conditioning Engineers and the Illuminating Engineering Society of North America (as in effect on the day before the date of the adoption of Standard 90.1–2010 of such Societies).

.

(c)

Effective date

(1)

Increased dollar limitations

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

(2)

Application to qualified energy efficient heating and air-conditioning property

The amendments made by subsection (b) shall apply to property acquired and placed in service after November 2, 2017. For purposes of the preceding sentence, property shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition.

3202.

Small business accounting method reform and simplification

(a)

Modification of limitation on cash method of accounting

(1)

Increased limitation

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

(c)

Gross receipts test

For purposes of this section—

(1)

In general

A corporation or partnership meets the gross receipts test of this subsection for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed $25,000,000.

.

(2)

Application of exception on annual basis

Section 448(b)(3) is amended to read as follows:

(3)

Entities which meet gross receipts test

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

.

(3)

Inflation adjustment

Section 448(c) is amended by adding at the end the following new paragraph:

(4)

Adjustment for inflation

In the case of any taxable year beginning after December 31, 2018, the dollar amount in paragraph (1) shall be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

the cost-of-living adjustment determined under section 1(c)(2) for the calendar year in which the taxable year begins, by substituting calendar year 2017 for calendar year 2016 in subparagraph (A)(ii) thereof.

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

.

(4)

Coordination with section 481

Section 448(d)(7) is amended to read as follows:

(7)

Coordination with section 481

Any change in method of accounting made pursuant to this section shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.

.

(5)

Application of exception to corporations engaged in farming

(A)

In general

Section 447(c) is amended—

(i)

by inserting for any taxable year after not being a corporation in the matter preceding paragraph (1), and

(ii)

by amending paragraph (2) to read as follows:

(2)

a corporation which meets the gross receipts test of section 448(c) for such taxable year.

.

(B)

Coordination with section 481

Section 447(f) is amended to read as follows:

(f)

Coordination with section 481

Any change in method of accounting made pursuant to this section shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.

.

(C)

Conforming amendments

Section 447 is amended—

(i)

by striking subsections (d), (e), (h), and (i), and

(ii)

by redesignating subsections (f) and (g) (as amended by subparagraph (B)) as subsections (d) and (e), respectively.

(b)

Exemption from UNICAP requirements

(1)

In general

Section 263A is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:

(i)

Exemption for certain small businesses

(1)

In general

In the case of any taxpayer (other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3)) which meets the gross receipts test of section 448(c) for any taxable year, this section shall not apply with respect to such taxpayer for such taxable year.

(2)

Application of gross receipts test to individuals, etc

In the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership.

(3)

Coordination with section 481

Any change in method of accounting made pursuant to this subsection shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.

.

(2)

Conforming amendment

Section 263A(b)(2) is amended to read as follows:

(2)

Property acquired for resale

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

.

(c)

Exemption from inventories

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

(c)

Exemption for certain small businesses

(1)

In general

In the case of any taxpayer (other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3)) which meets the gross receipts test of section 448(c) for any taxable year—

(A)

subsection (a) shall not apply with respect to such taxpayer for such taxable year, and

(B)

the taxpayer’s method of accounting for inventory for such taxable year shall not be treated as failing to clearly reflect income if such method either—

(i)

treats inventory as non-incidental materials and supplies, or

(ii)

conforms to such taxpayer’s method of accounting reflected in an applicable financial statement of the taxpayer with respect to such taxable year or, if the taxpayer does not have any applicable financial statement with respect to such taxable year, the books and records of the taxpayer prepared in accordance with the taxpayer’s accounting procedures.

(2)

Applicable financial statement

For purposes of this subsection, the term applicable financial statement 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 or State agency for nontax purposes, but only if there is no statement of the taxpayer described in clause (i) or (ii), or

(B)

a financial statement of the taxpayer which—

(i)

is used for a purpose described in subclause (I), (II), or (III) of subparagraph (A)(ii), or

(ii)

filed by the taxpayer with any regulatory or governmental body (whether domestic or foreign) specified by the Secretary,

but only if there is no statement of the taxpayer described in subparagraph (A).
(3)

Application of gross receipts test to individuals, etc

In the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership.

(4)

Coordination with section 481

Any change in method of accounting made pursuant to this subsection shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.

.

(d)

Exemption from percentage completion for long-term contracts

(1)

In general

Section 460(e)(1)(B) is amended—

(A)

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

(B)

by amending clause (ii) to read as follows:

(ii)

who meets the gross receipts test of section 448(c) for the taxable year in which such contract is entered into.

.

(2)

Conforming amendments

Section 460(e) is amended by striking paragraphs (2) and (3), by redesignating paragraphs (4), (5), and (6) as paragraphs (3), (4), and (5), respectively, and by inserting after paragraph (1) the following new paragraph:

(2)

Rules related to gross receipts test

(A)

Application of gross receipts test to individuals, etc

For purposes of paragraph (1)(B)(ii), in the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership.

(B)

Coordination with section 481

Any change in method of accounting made pursuant to paragraph (1)(B)(ii) shall be treated as initiated by the taxpayer and made with the consent of the Secretary. Such change shall be effected on a cut-off basis for all similarly classified contracts entered into on or after the year of change.

.

(e)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.

(2)

Preservation of suspense account rules with respect to any existing suspense accounts

So much of the amendments made by subsection (a)(5)(C) as relate to section 447(i) of the Internal Revenue Code of 1986 shall not apply with respect to any suspense account established under such section before the date of the enactment of this Act.

(3)

Exemption from percentage completion for long-term contracts

The amendments made by subsection (d) shall apply to contracts entered into after December 31, 2017, in taxable years ending after such date.

3203.

Small business exception from limitation on deduction of business interest

(a)

In general

Section 163(j)(2), as amended by section 3301, is amended to read as follows:

(2)

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.

.

(b)

Effective date

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

3204.

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 subsection:

(d)

Adjustments attributable to conversion from S corporation to C corporation

(1)

In general

In the case of an eligible terminated S corporation, any adjustment required by subsection (a)(2) which is attributable to such corporation’s revocation described in paragraph (2)(A)(ii) shall be taken into account ratably during the 6-taxable year period beginning with the year of change.

(2)

Eligible terminated S corporation

For purposes of this subsection, the term eligible terminated S corporation means any C corporation—

(A)

which—

(i)

was an S corporation on the day before the date of the enactment of the Tax Cuts and Jobs Act, and

(ii)

during the 2-year period beginning on the date of such enactment makes a revocation of its election under section 1362(a), and

(B)

the owners of the stock of which, determined on the date such revocation is made, are the same owners (and in identical proportions) as on the date of such enactment.

.

(b)

Cash distributions following post-termination transition period from S corporation status

Section 1371 is amended by adding at the end the following new subsection:

(f)

Cash distributions following post-termination transition period

In the case of a distribution of money by an eligible terminated S corporation (as defined in section 481(d)) after the post-termination transition period, the accumulated adjustments account shall be allocated to such distribution, and the distribution shall be chargeable to accumulated earnings and profits, in the same ratio as the amount of such accumulated adjustments account bears to the amount of such accumulated earnings and profits.

.

D

Reform of business-related exclusions, deductions, etc.

3301.

Interest

(a)

In general

Section 163(j) is amended to read as follows:

(j)

Limitation on business interest

(1)

In general

In the case of any taxpayer for any taxable year, the amount allowed as a deduction under this chapter for business interest shall not exceed the sum of—

(A)

the business interest income of such taxpayer for such taxable year,

(B)

30 percent of the adjusted taxable income of such taxpayer for such taxable year, plus

(C)

the floor plan financing interest of such taxpayer for such taxable year.

The amount determined under subparagraph (B) (after any increases in such amount under paragraph (3)(A)(iii)) shall not be less than zero.
(2)

Exemption for certain small businesses

For exemption for certain small businesses, see the amendment made by section 3203 of the Tax Cuts and Jobs Act.

(3)

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,

(ii)

the adjusted taxable income of each partner of such partnership shall be determined without regard to such partner’s distributive share of the non-separately stated taxable income or loss of such partnership, and

(iii)

the amount determined under paragraph (1)(B) with respect to each partner of such partnership shall be increased by such partner’s distributive share of such partnership’s excess amount.

(B)

Excess amount

The term excess amount means, with respect to any partnership, the excess (if any) of—

(i)

30 percent of the adjusted taxable income of the partnership, over

(ii)

the amount (if any) by which the business interest of the partnership, reduced by floor plan financing interest, exceeds the business interest income of the partnership.

(C)

Application to S corporations

Rules similar to the rules of subparagraphs (A) and (B) shall apply with respect to any S corporation and its shareholders.

(4)

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)).

(5)

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)).

(6)

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)

any deduction allowable for depreciation, amortization, or depletion, and

(B)

computed with such other adjustments as the Secretary may provide.

(7)

Trade or business

For purposes of this subsection, the term trade or business shall not include—

(A)

the trade or business of performing services as an employee,

(B)

a real property trade or business (as such term is defined in section 469(c)(7)(C)), or

(C)

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, or by a public service or public utility commission or other similar body of any State or political subdivision thereof.
(8)

Carryforward of disallowed interest

For carryforward of interest disallowed under paragraph (1), see subsection (o).

(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 to retail customers, 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)

A boat.

(vi)

Farm machinery or equipment.

(vii)

Construction machinery or equipment.

.

(b)

Carryforward of disallowed business interest

Section 163, after amendment by section 4302(a) and before amendment by section 4302(b), is amended by inserting after subsection (n) the following new subsection:

(o)

Carryforward of disallowed business interest

The amount of any business interest not allowed as a deduction for any taxable year by reason of subsection (j) shall be treated as business interest paid or accrued in the succeeding taxable year. Business interest paid or accrued in any taxable year (determined without regard to the preceding sentence) shall not be carried past the 5th taxable year following such taxable year, determined by treating business interest as allowed as a deduction on a first-in, first-out basis.

.

(c)

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 interest

The carryover of disallowed interest described in section 163(o) 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(o) 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).

(d)

Effective date

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

3302.

Modification of net operating loss deduction

(a)

Indefinite carryforward of net operating losses

Section 172(b)(1)(A)(ii) is amended by striking to each of the 20 taxable years and inserting to each taxable year.

(b)

Repeal of net operating loss carrybacks other than 1-year carryback of eligible disaster losses

(1)

In general

Section 172(b)(1)(A)(i) is amended to read as follows:

(i)

in the case of any portion of a net operating loss for the taxable year which is an eligible disaster loss with respect to the taxpayer, shall be a net operating loss carryback to the taxable year preceding the taxable year of such loss, and

.

(2)

Conforming amendments

(A)

Section 172(b)(1) is amended by striking subparagraphs (B) through (F) and inserting the following:

(B)

Eligible disaster loss

(i)

In general

For purposes of subparagraph (A)(i), the term eligible disaster loss means—

(I)

in the case of a taxpayer which is a small business, net operating losses attributable to federally declared disasters (as defined by section 165(i)(5)), and

(II)

in the case of a taxpayer engaged in the trade or business of farming, net operating losses attributable to such federally declared disasters.

(ii)

Small business

For purposes of this subparagraph, the term small business means a corporation or partnership which meets the gross receipts test of section 448(c) (determined by substituting $5,000,000 for $25,000,000 each place it appears therein) for the taxable year in which the loss arose (or, in the case of a sole proprietorship, which would meet such test if such proprietorship were a corporation).

(iii)

Trade or business of farming

For purposes of this subparagraph, the trade or business of farming shall include the trade or business of—

(I)

operating a nursery or sod farm, or

(II)

the raising or harvesting of trees bearing fruit, nuts, or other crops, or ornamental trees.

For purposes of subclause (II), an evergreen tree which is more than 6 years old at the time severed from the roots shall not be treated as an ornamental tree.

.

(B)

Section 172 is amended by striking subsections (f), (g), and (h).

(c)

Limitation of net operating loss to 90 percent of taxable income

(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 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.

.

(d)

Annual increase of indefinite carryover amounts

Section 172(b) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:

(3)

Annual increase of indefinite carryover amounts

For purposes of paragraph (2)—

(A)

the amount of any indefinite net operating loss which is carried to the next succeeding taxable year after the loss year (within the meaning of paragraph (2)) shall be increased by an amount equal to—

(i)

the amount of the loss which may be so carried over to such succeeding taxable year (determined without regard to this paragraph), multiplied by

(ii)

the sum of—

(I)

the annual Federal short-term rate (determined under section 1274(d)) for the last month ending before the beginning of such taxable year, plus

(II)

4 percentage points, and

(B)

the amount of any indefinite net operating loss which is carried to any succeeding taxable year (after such next succeeding taxable year) shall be an amount equal to—

(i)

the excess of—

(I)

the amount of the loss carried to the prior taxable year (after any increase under this paragraph with respect to such amount), over

(II)

the amount by which such loss was reduced under paragraph (2) by reason of the taxable income for such prior taxable year, multiplied by

(ii)

a percentage equal to 100 percent plus the percentage determined under subparagraph (A)(ii) with respect to such succeeding taxable year.

For purposes of the preceding sentence, the term indefinite net operating loss means any net operating loss arising in a taxable year beginning after December 31, 2017.

.

(e)

Effective date

(1)

Carryforwards and carrybacks

The amendments made by subsections (a) and (b) shall apply to net operating losses arising in taxable years beginning after December 31, 2017.

(2)

Net operating loss limited to 90 percent of taxable income

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

(3)

Annual increase in carryover amounts

The amendments made by subsection (d) shall apply to amounts carried to taxable years beginning after December 31, 2017.

(4)

Special rule for net disaster losses

Notwithstanding paragraph (1), the amendments made by subsection (b) shall not apply to the portion of the net operating loss for any taxable year which is a net disaster loss to which section 504(b) of the Disaster Tax Relief and Airport and Airway Extension Act of 2017 applies.

3303.

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)

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.

.

(2)

Section 1031 is amended by striking subsections (e) and (i).

(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.

3304.

Revision of treatment of contributions to capital

(a)

Inclusion of contributions to capital

Part II of subchapter B of chapter 1 is amended by inserting after section 75 the following new section:

76.

Contributions to capital

(a)

In general

Gross income includes any contribution to the capital of any entity.

(b)

Treatment of contributions in exchange for stock, etc

(1)

In general

In the case of any contribution of money or other property to a corporation in exchange for stock of such corporation—

(A)

such contribution shall not be treated for purposes of subsection (a) as a contribution to the capital of such corporation (and shall not be includible in the gross income of such corporation), and

(B)

no gain or loss shall be recognized to such corporation upon the issuance of such stock.

(2)

Treatment limited to value of stock

For purposes of this subsection, a contribution of money or other property to a corporation shall be treated as being in exchange for stock of such corporation only to the extent that the fair market value of such money and other property does not exceed the fair market value of such stock.

(3)

Application to entities other than corporations

In the case of any entity other than a corporation, rules similar to the rules of paragraphs (1) and (2) shall apply in the case of any contribution of money or other property to such entity in exchange for any interest in such entity.

(c)

Treasury stock treated as stock

Any reference in this section to stock shall be treated as including a reference to treasury stock.

.

(b)

Basis of corporation in contributed property

(1)

Contributions to capital

Subsection (c) of section 362 is amended to read as follows:

(c)

Contributions to capital

If property other than money is transferred to a corporation as a contribution to the capital of such corporation (within the meaning of section 76) then the basis of such property shall be the greater of—

(1)

the basis determined in the hands of the transferor, increased by the amount of gain recognized to the transferor on such transfer, or

(2)

the amount included in gross income by such corporation under section 76 with respect to such contribution.

.

(2)

Contributions in exchange for stock

Paragraph (2) of section 362(a) is amended by striking contribution to capital and inserting contribution in exchange for stock of such corporation (determined under rules similar to the rules of paragraphs (2) and (3) of section 76(b)).

(c)

Conforming amendments

(1)

Section 108(e) is amended by striking paragraph (6).

(2)

Part III of subchapter B of chapter 1 is amended by striking section 118 (and by striking the item relating to such section in the table of sections for such part).

(3)

The table of sections for part II of subchapter B of chapter 1 is amended by inserting after the item relating to section 75 the following new item:

Sec. 76. Contributions to capital.

.

(d)

Effective date

The amendments made by this section shall apply to contributions made, and transactions entered into, after the date of the enactment of this Act.

3305.

Repeal of deduction for local lobbying expenses

(a)

In general

Section 162(e) is amended by striking paragraphs (2) and (7) and by redesignating paragraphs (3), (4), (5), (6), and (8) as paragraphs (2), (3), (4), (5), and (6), respectively.

(b)

Conforming amendment

Section 6033(e)(1)(B)(ii) is amended by striking section 162(e)(5)(B)(ii) and inserting section 162(e)(4)(B)(ii).

(c)

Effective date

The amendments made by this section shall apply to amounts paid or incurred after December 31, 2017.

3306.

Repeal of deduction for income attributable to domestic production activities

(a)

In general

Part VI of subchapter B of chapter 1 is amended by striking section 199 (and by striking the item relating to such section in the table of sections for such part).

(b)

Conforming amendments

(1)

Sections 74(d)(2)(B), 86(b)(2)(A), 137(b)(3)(A), 219(g)(3)(A)(ii), and 246(b)(1) are each amended by striking 199,.

(2)

Section 170(b)(2)(D), as amended by the preceding provisions of this Act, is amended by striking clause (iv), by redesignating clause (v) as clause (iv), and by inserting and at the end of clause (iii).

(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), respectively.

(6)

Section 1402(a) is amended by adding and at the end of paragraph (15) and by striking paragraph (16).

(c)

Effective date

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

3307.

Entertainment, etc. expenses

(a)

Denial of deduction

Subsection (a) of section 274 is amended to read as follows:

(a)

Entertainment, amusement, recreation, and other fringe benefits

(1)

In general

No deduction otherwise allowable under this chapter shall be allowed for amounts paid or incurred for any of the following items:

(A)

Activity

With respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation.

(B)

Membership dues

With respect to membership in any club organized for business, pleasure, recreation or other social purposes.

(C)

Amenity

With respect to a de minimis fringe (as defined in section 132(e)(1)) that is primarily personal in nature and involving property or services that are not directly related to the taxpayer’s trade or business.

(D)

Facility

With respect to a facility or portion thereof used in connection with an activity referred to in subparagraph (A), membership dues or similar amounts referred to in subparagraph (B), or an amenity referred to in subparagraph (C).

(E)

Qualified transportation fringe and parking facility

Which is a qualified transportation fringe (as defined in section 132(f)) or which is a parking facility used in connection with qualified parking (as defined in section 132(f)(5)(C)).

(F)

On-premises athletic facility

Which is an on-premises athletic facility as defined in section 132(j)(4)(B).

(2)

Special rules

For purposes of applying paragraph (1), an activity described in section 212 shall be treated as a trade or business.

(3)

Regulations

Under the regulations prescribed to carry out this section, the Secretary shall include regulations—

(A)

defining entertainment, amenities, recreation, amusement, and facilities for purposes of this subsection,

(B)

providing for the appropriate allocation of depreciation and other costs with respect to facilities used for parking or for on-premises athletic facilities, and

(C)

specifying arrangements a primary purpose of which is the avoidance of this subsection.

.

(b)

Exception for certain expenses includible in income of recipient

(1)

Expenses treated as compensation

Paragraph (2) of section 274(e) is amended to read as follows:

(2)

Expenses treated as compensation

Expenses for goods, services, and facilities, to the extent that the expenses do not exceed the amount of the expenses which are treated by the taxpayer, with respect to the recipient of the entertainment, amusement, or recreation, as compensation to an employee on the taxpayer’s return of tax under this chapter and as wages to such employee for purposes of chapter 24 (relating to withholding of income tax at source on wages).

.

(2)

Expenses includible in income of persons who are not employees

Paragraph (9) of section 274(e) is amended by striking to the extent that the expenses and inserting to the extent that the expenses do not exceed the amount of the expenses that.

(c)

Exceptions for reimbursed expenses

Paragraph (3) of section 274(e) is amended to read as follows:

(3)

Reimbursed expenses

(A)

In general

Expenses paid or incurred by the taxpayer, in connection with the performance by him of services for another person (whether or not such other person is the taxpayer’s employer), under a reimbursement or other expense allowance arrangement with such other person, but this paragraph shall apply—

(i)

where the services are performed for an employer, only if the employer has not treated such expenses in the manner provided in paragraph (2), or

(ii)

where the services are performed for a person other than an employer, only if the taxpayer accounts (to the extent provided by subsection (d)) to such person.

(B)

Exception

Except as provided by the Secretary, subparagraph (A) shall not apply—

(i)

in the case of an arrangement in which the person other than the employer is an entity described in section 168(h)(2)(A), or

(ii)

to any other arrangement designated by the Secretary as having the effect of avoiding the limitation under subparagraph (A).

.

(d)

50 percent limitation on meals and entertainment expenses

Subsection (n) of section 274 is amended to read as follows:

(n)

Limitation on certain expenses

(1)

In general

The amount allowable as a deduction under this chapter for any expense for food or beverages (pursuant to subsection (e)(1)) or business meals (pursuant to subsection (k)(1)) shall not exceed 50 percent of the amount of such expense or item which would (but for this paragraph) be allowable as a deduction under this chapter.

(2)

Exceptions

Paragraph (1) shall not apply to any expense if—

(A)

such expense is described in paragraph (2), (3), (6), (7), or (8) of subsection (e),

(B)

in the case of an expense for food or beverages, such expense is excludable from the gross income of the recipient under section 132 by reason of subsection (e) thereof (relating to de minimis fringes) or under section 119 (relating to meals and lodging furnished for convenience of employer), or

(C)

in the case of an employer who pays or reimburses moving expenses of an employee, such expenses are includible in the income of the employee under section 82.

(3)

Special rule for individuals subject to Federal hours of service

In the case of any expenses for food or beverages consumed while away from home (within the meaning of section 162(a)(2)) by an individual during, or incident to, the period of duty subject to the hours of service limitations of the Department of Transportation, paragraph (1) shall be applied by substituting 80 percent for 50 percent.

.

(e)

Conforming amendments

(1)

Section 274(d) is amended—

(A)

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

(B)

in the flush material following paragraph (3) (as so redesignated)—

(i)

by striking , entertainment, amusement, recreation, or in item (B), and

(ii)

by striking (D) the business relationship to the taxpayer of persons entertained, using the facility or property, or receiving the gift and inserting (D) the business relationship to the taxpayer of the person receiving the benefit.

(2)

Section 274(e) is amended by striking paragraph (4) and redesignating paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), (5), (6), (7), and (8), respectively.

(3)

Section 274(k)(2)(A) is amended by striking (4), (7), (8), or (9) and inserting (6), (7), or (8).

(4)

Section 274 is amended by striking subsection (l).

(5)

Section 274(m)(1)(B)(ii) is amended by striking (4), (7), (8), or (9) and inserting (6), (7), or (8).

(f)

Effective date

The amendments made by this section shall apply to amounts paid or incurred after December 31, 2017.

3308.

Unrelated business taxable income increased by amount of certain fringe benefit expenses for which deduction is disallowed

(a)

In general

Section 512(a) is amended by adding at the end the following new paragraph:

(6)

Increase in unrelated business taxable income by disallowed fringe

Unrelated business taxable income of an organization shall be increased by any amount for which a deduction is not allowable under this chapter by reason of section 274 and which is paid or incurred by such organization for any qualified transportation fringe (as defined in section 132(f)), any parking facility used in connection with qualified parking (as defined in section 132(f)(5)(C)), or any on-premises athletic facility (as defined in section 132(j)(4)(B)). The preceding sentence shall not apply to the extent the amount paid or incurred is directly connected with an unrelated trade or business which is regularly carried on by the organization. The Secretary may issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this paragraph, including regulations or other guidance providing for the appropriate allocation of depreciation and other costs with respect to facilities used for parking or for on-premises athletic facilities.

.

(b)

Effective date

The amendment made by this section shall apply to amounts paid or incurred after December 31, 2017.

3309.

Limitation on deduction for FDIC premiums

(a)

In general

Section 162 is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection:

(q)

Disallowance of FDIC premiums paid by certain large financial institutions

(1)

In general

No deduction shall be allowed for the applicable percentage of any FDIC premium paid or incurred by the taxpayer.

(2)

Exception for small institutions

Paragraph (1) shall not apply to any taxpayer for any taxable year if the total consolidated assets of such taxpayer (determined as of the close of such taxable year) do not exceed $10,000,000,000.

(3)

Applicable percentage

For purposes of this subsection, the term applicable percentage means, with respect to any taxpayer for any taxable year, the ratio (expressed as a percentage but not greater than 100 percent) which—

(A)

the excess of—

(i)

the total consolidated assets of such taxpayer (determined as of the close of such taxable year), over

(ii)

$10,000,000,000, bears to

(B)

$40,000,000,000.

(4)

FDIC premiums

For purposes of this subsection, the term FDIC premium means any assessment imposed under section 7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)).

(5)

Total consolidated assets

For purposes of this subsection, the term total consolidated assets has the meaning given such term under section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5365).

(6)

Aggregation rule

(A)

In general

Members of an expanded affiliated group shall be treated as a single taxpayer for purposes of applying this subsection.

(B)

Expanded affiliated group

For purposes of this paragraph, the term expanded affiliated group means an affiliated group as defined in section 1504(a), determined—

(i)

by substituting more than 50 percent for at least 80 percent each place it appears, and

(ii)

without regard to paragraphs (2) and (3) of section 1504(b).

A partnership or any other entity (other than a corporation) shall be treated as a member of an expanded affiliated group if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence).

.

(b)

Effective date

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

3310.

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

(a)

In general

Part III of subchapter O of chapter 1 is amended by striking section 1044 (and by striking the item relating to such section in the table of sections of such part).

(b)

Conforming amendments

Section 1016(a)(23) is amended—

(1)

by striking 1044,, and

(2)

by striking 1044(d),.

(c)

Effective date

The amendments made by this section shall apply to sales after December 31, 2017.

3311.

Certain self-created property not treated as a capital asset

(a)

Patents, etc

Section 1221(a)(3) is amended by inserting a patent, invention, model or design (whether or not patented), a secret formula or process, before a copyright.

(b)

Conforming amendment

Section 1231(b)(1)(C) is amended by inserting a patent, invention, model or design (whether or not patented), a secret formula or process, before a copyright.

(c)

Effective date

The amendments made by this section shall apply to dispositions after December 31, 2017.

3312.

Repeal of special rule for sale or exchange of patents

(a)

In general

Part IV of subchapter P of chapter 1 is amended by striking section 1235 (and by striking the item relating to such section in the table of sections of such part).

(b)

Conforming amendments

(1)

Section 483(d) is amended by striking paragraph (4).

(2)

Section 901(l)(5) is amended by striking without regard to section 1235 or any similar rule and inserting without regard to any provision which treats a disposition as a sale or exchange of a capital asset held for more than 1 year or any similar provision.

(3)

Section 1274(c)(3) is amended by striking subparagraph (E) and redesignating subparagraph (F) as subparagraph (E).

(c)

Effective date

The amendments made by this section shall apply to dispositions after December 31, 2017.

3313.

Repeal of technical termination of partnerships

(a)

In general

Paragraph (1) of section 708(b) is amended—

(1)

by striking , or at the end of subparagraph (A) and all that follows and inserting a period, and

(2)

by striking only if— and all that follows through no part of any business and inserting the following: only if no part of any business.

(b)

Effective date

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

3314.

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.
(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)

Coordination with section 83

Subsection (e) of section 83 is amended by striking or at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting , or, and by adding at the end the following new paragraph:

(6)

a transfer of an applicable partnership interest to which section 1061 applies.

.

(c)

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.

.

(d)

Effective date

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

3315.

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)

Clerical amendment

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

Sec. 174. Amortization of research and experimental expenditures.

.

(c)

Effective date

The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2022.

3316.

Uniform treatment of expenses in contingency fee cases

(a)

In general

Section 162, as amended by the preceding provisions of this Act, is amended by redesignating subsection (r) as subsection (s) and by inserting after subsection (q) the following new subsection:

(r)

Expenses in contingency fee cases

No deduction shall be allowed under subsection (a) to a taxpayer for any expense—

(1)

paid or incurred in the course of the trade or business of practicing law, and

(2)

resulting from a case for which the taxpayer is compensated primarily on a contingent basis,

until such time as such contingency is resolved.

.

(b)

Effective date

The amendment made by this section shall apply to expenses and costs paid or incurred in taxable years beginning after the date of the enactment of this Act.

E

Reform of business credits

3401.

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

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45C (and by striking the item relating to such section in the table of sections for such subpart).

(b)

Conforming amendments

(1)

Section 38(b) is amended by striking paragraph (12).

(2)

Section 280C is amended by striking subsection (b).

(3)

Section 6501(m) is amended by striking 45C(d)(4),.

(c)

Effective date

The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2017.

3402.

Repeal of employer-provided child care credit

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45F (and by striking the item relating to such section in the table of sections for such subpart).

(b)

Conforming amendments

(1)

Section 38(b) is amended by striking paragraph (15).

(2)

Section 1016(a) is amended by striking paragraph (28).

(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, 2017.

(2)

Basis adjustments

The amendment made by subsection (b)(2) shall apply to credits determined for taxable years beginning after December 31, 2017.

3403.

Repeal of rehabilitation credit

(a)

In general

Subpart E of part IV of subchapter A of chapter 1 is amended by striking section 47 (and by striking the item relating to such section in the table of sections for such subpart).

(b)

Conforming amendments

(1)

Section 170(f)(14)(A) is amended by inserting (as in effect before its repeal by the Tax Cuts and Jobs Act) after section 47.

(2)

Section 170(h)(4) is amended—

(A)

by striking (as defined in section 47(c)(3)(B)) in subparagraph (C)(ii), and

(B)

by adding at the end the following new subparagraph:

(D)

Registered historic district

The term registered historic district means—

(i)

any district listed in the National Register, and

(ii)

any district—

(I)

which is designated under a statute of the appropriate State or local government, if such statute is certified by the Secretary of the Interior to the Secretary as containing criteria which will substantially achieve the purpose of preserving and rehabilitating buildings of historic significance to the district, and

(II)

which is certified by the Secretary of the Interior to the Secretary as meeting substantially all of the requirements for the listing of districts in the National Register.

.

(3)

Section 469(i)(3) is amended by striking subparagraph (B).

(4)

Section 469(i)(6)(B) is amended—

(A)

by striking in the case of— and all that follows and inserting in the case of any credit determined under section 42 for any taxable year., and

(B)

by striking , rehabilitation credit, in the heading thereof.

(5)

Section 469(k)(1) is amended by striking , or any rehabilitation credit determined under section 47,.

(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 (within the meaning of section 47 of the Internal Revenue Code of 1986 as in effect before its repeal) with respect to any building—

(A)

owned or leased (as permitted by section 47 of the Internal Revenue Code of 1986 as in effect before its repeal) by the taxpayer at all times after December 31, 2017, and

(B)

with respect to which the 24-month period selected by the taxpayer under section 47(c)(1)(C) of such Code begins not later than the end of the 180-day period beginning on the date of the enactment of this Act,

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.
3404.

Repeal of work opportunity tax credit

(a)

In general

Subpart F of part IV of subchapter A of chapter 1 is amended by striking section 51 (and by striking the item relating to such section in the table of sections for such subpart).

(b)

Clerical amendment

The heading of such subpart F (and the item relating to such subpart in the table of subparts for part IV of subchapter A of chapter 1) are each amended by striking Rules for Computing Work Opportunity Credit and inserting Special Rules.

(c)

Effective date

The amendments made by this section shall apply to amounts paid or incurred to individuals who begin work for the employer after December 31, 2017.

3405.

Repeal of deduction for certain unused business credits

(a)

In general

Part VI of subchapter B of chapter 1 is amended by striking section 196 (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.

3406.

Termination of new markets tax credit

(a)

In general

Section 45D(f) is amended—

(1)

by striking 2019 in paragraph (1)(G) and inserting 2017, and

(2)

by striking 2024 in paragraph (3) and inserting 2022.

(b)

Effective date

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

3407.

Repeal of credit for expenditures to provide access to disabled individuals

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 44 (and by striking the item relating to such section in the table of sections for such subpart).

(b)

Conforming amendment

Section 38(b) is amended by striking paragraph (7).

(c)

Effective date

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

3408.

Modification of credit for portion of employer social security taxes paid with respect to employee tips

(a)

Credit determined with respect to minimum wage as in effect

Section 45B(b)(1)(B) is amended by striking as in effect on January 1, 2007, and.

(b)

Information return requirement

Section 45B is amended by redesignating subsections (c) and (d) as subsections (d) and (e), respectively, and by inserting after subsection (b) the following new subsection:

(c)

Information return requirement

(1)

In general

No credit shall be determined under subsection (a) with respect to any food or beverage establishment of any taxpayer for any taxable year unless such taxpayer has, with respect to the calendar year which ends in or with such taxable year—

(A)

made a report to the Secretary showing the information described in section 6053(c)(1) with respect to such food or beverage establishment, and

(B)

furnished written statements to each employee of such food or beverage establishment showing the information described in section 6053(c)(2).

(2)

Allocation of 10 percent of gross receipts

For purposes of determining the information referred to in subparagraphs (A) and (B), section 6053(c)(3)(A)(i) shall be applied by substituting 10 percent for 8 percent. For purposes of section 6053(c)(5), any reference to section 6053(c)(3)(B) contained therein shall be treated as including a reference to this paragraph.

(3)

Food or beverage establishment

For purposes of this subsection, the term food or beverage establishment means any trade or business (or portion thereof) which would be a large food or beverage establishment (as defined in section 6053(c)(4)) if such section were applied without regard to subparagraph (C) thereof.

.

(c)

Effective date

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

F

Energy credits

3501.

Modifications to credit for electricity produced from certain renewable resources

(a)

Termination of inflation adjustment

Section 45(b)(2) is amended—

(1)

by striking The 1.5 cent amount and inserting the following:

(A)

In general

The 1.5 cent amount

, and

(2)

by adding at the end the following new subparagraph:

(B)

Termination

Subparagraph (A) shall not apply with respect to any electricity or refined coal produced at a facility the construction of which begins after the date of the enactment of this subparagraph.

.

(b)

Special rule for determination of beginning of construction

Section 45(e) is amended by adding at the end the following new paragraph:

(12)

Special rule for determining beginning of construction

For purposes of subsection (d), the construction of any facility, modification, improvement, addition, or other property shall not be treated as beginning before any date unless there is a continuous program of construction which begins before such date and ends on the date that such property is placed in service.

.

(c)

Effective dates

(1)

Termination of inflation adjustment

The amendments made by subsection (a) shall apply to taxable years ending after the date of the enactment of this Act.

(2)

Special rule for determination of beginning of construction

The amendment made by subsection (b) shall apply to taxable years beginning before, on, or after the date of the enactment of this Act.

3502.

Modification of the energy investment tax credit

(a)

Extension of solar energy property

Section 48(a)(3)(A)(ii) is amended by striking periods ending before January 1, 2017 and inserting property the construction of which begins before January 1, 2022.

(b)

Extension of qualified fuel cell property

Section 48(c)(1)(D) is amended by striking for any period after December 31, 2016 and inserting the construction of which does not begin before January 1, 2022.

(c)

Extension of qualified microturbine property

Section 48(c)(2)(D) is amended by striking for any period after December 31, 2016 and inserting the construction of which does not begin before January 1, 2022.

(d)

Extension of combined heat and power system property

Section 48(c)(3)(A)(iv) is amended by striking which is placed in service before January 1, 2017 and inserting the construction of which begins before January 1, 2022.

(e)

Extension of qualified small wind energy property

Section 48(c)(4)(C) is amended by striking for any period after December 31, 2016 and inserting the construction of which does not begin before January 1, 2022.

(f)

Extension of thermal energy property

Section 48(a)(3)(A)(vii) is amended by striking periods ending before January 1, 2017 and inserting property the construction of which begins before January 1, 2022.

(g)

Phaseout of 30 percent credit rate for fuel cell and small wind energy property

Section 48(a) is amended by adding at the end the following new paragraph:

(7)

Phaseout for qualified fuel cell property and qualified small wind energy property

(A)

In general

In the case of qualified fuel cell property or qualified small wind energy property, the construction of which begins before January 1, 2022, the energy percentage determined under paragraph (2) shall be equal to—

(i)

in the case of any property the construction of which begins after December 31, 2019, and before January 1, 2021, 26 percent, and

(ii)

in the case of any property the construction of which begins after December 31, 2020, and before January 1, 2022, 22 percent.

(B)

Placed in service deadline

In the case of any qualified fuel cell property or qualified small wind energy property, the construction of which begins before January 1, 2022, and which is not placed in service before January 1, 2024, the energy percentage determined under paragraph (2) shall be equal to 10 percent.

.

(h)

Phaseout for fiber-optic solar energy property

Subparagraphs (A) and (B) of section 48(a)(6) are each amended by inserting or (3)(A)(ii) after paragraph (3)(A)(i).

(i)

Termination of solar energy property

Section 48(a)(3)(A)(i) is amended by inserting , the construction of which begins before January 1, 2028, and after equipment.

(j)

Termination of geothermal energy property

Section 48(a)(3)(A)(iii) is amended by inserting , the construction of which begins before January 1, 2028, and after equipment.

(k)

Special rule for determination of beginning of construction

Section 48(c) is amended by adding at the end the following new paragraph:

(5)

Special rule for determining beginning of construction

The construction of any facility, modification, improvement, addition, or other property shall not be treated as beginning before any date unless there is a continuous program of construction which begins before such date and ends on the date that such property is placed in service.

.

(l)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to periods after December 31, 2016, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

(2)

Extension of combined heat and power system property

The amendment made by subsection (d) shall apply to property placed in service after December 31, 2016.

(3)

Phaseouts and terminations

The amendments made by subsections (g), (h), (i), and (j) shall take effect on the date of the enactment of this Act.

(4)

Special rule for determination of beginning of construction

The amendment made by subsection (k) shall apply to taxable years beginning before, on, or after the date of the enactment of this Act.

3503.

Extension and phaseout of residential energy efficient property

(a)

Extension

Section 25D(h) is amended by striking December 31, 2016 (December 31, 2021, in the case of any qualified solar electric property expenditures and qualified solar water heating property expenditures) and inserting December 31, 2021.

(b)

Phaseout

(1)

In general

Paragraphs (3), (4), and (5) of section 25D(a) are amended by striking 30 percent each place it appears and inserting the applicable percentage.

(2)

Conforming amendment

Section 25D(g) of such Code is amended by striking paragraphs (1) and (2) of.

(c)

Effective date

The amendments made by this section shall apply to property placed in service after December 31, 2016.

3504.

Repeal of enhanced oil recovery credit

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 43 (and by striking the item relating to such section in the table of sections for such subpart).

(b)

Conforming amendments

(1)

Section 38(b) is amended by striking paragraph (6).

(2)

Section 6501(m) is amended by striking 43,.

(c)

Effective date

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

3505.

Repeal of credit for producing oil and gas from marginal wells

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45I (and by striking the item relating to such section in the table of sections for such subpart).

(b)

Conforming amendment

Section 38(b) is amended by striking paragraph (19).

(c)

Effective date

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

3506.

Modifications of credit for production from advanced nuclear power facilities

(a)

Treatment of unutilized limitation amounts

Section 45J(b) is amended—

(1)

in paragraph (4), by inserting or any amendment to after enactment of; and

(2)

by adding at the end the following new paragraph:

(5)

Allocation of unutilized limitation

(A)

In general

Any unutilized national megawatt capacity limitation shall be allocated by the Secretary under paragraph (3) as rapidly as is practicable after December 31, 2020—

(i)

first to facilities placed in service on or before such date to the extent that such facilities did not receive an allocation equal to their full nameplate capacity; and

(ii)

then to facilities placed in service after such date in the order in which such facilities are placed in service.

(B)

Unutilized national megawatt capacity limitation

The term unutilized national megawatt capacity limitation means the excess (if any) of—

(i)

6,000 megawatts, over

(ii)

the aggregate amount of national megawatt capacity limitation allocated by the Secretary before January 1, 2021, reduced by any amount of such limitation which was allocated to a facility which was not placed in service before such date.

(C)

Coordination with other provisions

In the case of any unutilized national megawatt capacity limitation allocated by the Secretary pursuant to this paragraph—

(i)

such allocation shall be treated for purposes of this section in the same manner as an allocation of national megawatt capacity limitation; and

(ii)

subsection (d)(1)(B) shall not apply to any facility which receives such allocation.

.

(b)

Transfer of credit by certain public entities

(1)

In general

Section 45J is amended—

(A)

by redesignating subsection (e) as subsection (f); and

(B)

by inserting after subsection (d) the following new subsection:

(e)

Transfer of credit by certain public entities

(1)

In general

If, with respect to a credit under subsection (a) for any taxable year—

(A)

the taxpayer would be a qualified public entity; and

(B)

such entity elects the application of this paragraph for such taxable year with respect to all (or any portion specified in such election) of such credit,

the eligible project partner specified in such election (and not the qualified public entity) shall be treated as the taxpayer for purposes of this title with respect to such credit (or such portion thereof).
(2)

Definitions

For purposes of this subsection—

(A)

Qualified public entity

The term qualified public entity means—

(i)

a Federal, State, or local government entity, or any political subdivision, agency, or instrumentality thereof;

(ii)

a mutual or cooperative electric company described in section 501(c)(12) or section 1381(a)(2); or

(iii)

a not-for-profit electric utility which has or had received a loan or loan guarantee under the Rural Electrification Act of 1936.

(B)

Eligible project partner

The term eligible project partner means—

(i)

any person responsible for, or participating in, the design or construction of the advanced nuclear power facility to which the credit under subsection (a) relates;

(ii)

any person who participates in the provision of the nuclear steam supply system to the advanced nuclear power facility to which the credit under subsection (a) relates;

(iii)

any person who participates in the provision of nuclear fuel to the advanced nuclear power facility to which the credit under subsection (a) relates; or

(iv)

any person who has an ownership interest in such facility.

(3)

Special rules

(A)

Application to partnerships

In the case of a credit under subsection (a) which is determined at the partnership level—

(i)

for purposes of paragraph (1)(A), a qualified public entity shall be treated as the taxpayer with respect to such entity’s distributive share of such credit; and

(ii)

the term eligible project partner shall include any partner of the partnership.

(B)

Taxable year in which credit taken into account

In the case of any credit (or portion thereof) with respect to which an election is made under paragraph (1), such credit shall be taken into account in the first taxable year of the eligible project partner ending with, or after, the qualified public entity’s taxable year with respect to which the credit was determined.

(C)

Treatment of transfer under private use rules

For purposes of section 141(b)(1), any benefit derived by an eligible project partner in connection with an election under this subsection shall not be taken into account as a private business use.

.

(2)

Special rule for proceeds of transfers for mutual or cooperative electric companies

Section 501(c)(12) of such Code is amended by adding at the end the following new subparagraph:

(I)

In the case of a mutual or cooperative electric company described in this paragraph or an organization described in section 1381(a)(2), income received or accrued in connection with an election under section 45J(e)(1) shall be t