,,ii ,calendar ,no4 #bff #aaeth ,,congress #ast ,session ,h4 ,r4 #a ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,november #bg1 #bjag,received2 read the first time ,november #bh1 #bjag,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 #bjah4 #a4 ,short title2 etc 7a7 ,short title ,this ,act may be cited as the ,tax ,cuts and ,jobs ,act4 7b7 ,amendment of #aihf ,code ,except as otherwise expressly provided1 whenever in this ,act an amendment or repeal is expressed in terms of an amendment to1 or repeal of1 a section or other provision1 the reference shall be considered to be made to a section or other provision of the ,internal ,revenue ,code of #aihf4 7c7 ,table of contents ,the table of contents for this ,act is as follows3 ,sec4 #a4 ,short title2 etc4 ,title ,i--,tax reform for individuals ,subtitle ,a--,simplification and reform of rates1 standard deduction1 and exemptions ,sec4 #ajja4 ,reduction and simplification of individual income tax rates4 ,sec4 #ajjb4 ,enhancement of standard deduction4 ,sec4 #ajjc4 ,repeal of deduction for personal exemptions4 ,sec4 #ajjd4 ,maximum rate on business income of individuals4 ,sec4 #ajje4 ,conforming amendments related to simplification of individual income tax rates4 ,subtitle ,b--,simplification and reform of family and individual tax credits ,sec4 #aaja4 ,enhancement of child tax credit and new family tax credit4 ,sec4 #aajb4 ,repeal of nonrefundable credits4 ,sec4 #aajc4 ,refundable credit program integrity4 ,sec4 #aajd4 ,procedures to reduce improper claims of earned income credit4 ,sec4 #aaje4 ,certain income disallowed for purposes of the earned income tax credit4 ,subtitle ,c--,simplification and reform of education incentives ,sec4 #abja4 ,american opportunity tax credit4 ,sec4 #abjb4 ,consolidation of education savings rules4 ,sec4 #abjc4 ,reforms to discharge of certain student loan indebtedness4 ,sec4 #abjd4 ,repeal of other provisions relating to education4 ,sec4 #abje4 ,rollovers between qualified tuition programs and qualified ,,able programs4 ,subtitle ,d--,simplification and reform of deductions ,sec4 #acja4 ,repeal of overall limitation on itemized deductions4 ,sec4 #acjb4 ,mortgage interest4 ,sec4 #acjc4 ,repeal of deduction for certain taxes not paid or accrued in a trade or business4 ,sec4 #acjd4 ,repeal of deduction for personal casualty losses4 ,sec4 #acje4 ,limitation on wagering losses4 ,sec4 #acjf4 ,charitable contributions4 ,sec4 #acjg4 ,repeal of deduction for tax preparation expenses4 ,sec4 #acjh4 ,repeal of medical expense deduction4 ,sec4 #acji4 ,repeal of deduction for alimony payments4 ,sec4 #acaj4 ,repeal of deduction for moving expenses4 ,sec4 #acaa4 ,termination of deduction and exclusions for contributions to medical savings accounts4 ,sec4 #acab4 ,denial of deduction for expenses attributable to the trade or business of being an employee4 ,subtitle ,e--,simplification and reform of exclusions and taxable compensation ,sec4 #adja4 ,limitation on exclusion for employer-provided housing4 ,sec4 #adjb4 ,exclusion of gain from sale of a principal residence4 ,sec4 #adjc4 ,repeal of exclusion1 etc41 for employee achievement awards4 ,sec4 #adjd4 ,sunset of exclusion for dependent care assistance programs4 ,sec4 #adje4 ,repeal of exclusion for qualified moving expense reimbursement4 ,sec4 #adjf4 ,repeal of exclusion for adoption assistance programs4 ,subtitle ,f--,simplification and reform of savings1 pensions1 retirement ,sec4 #aeja4 ,repeal of special rule permitting recharacterization of ,roth ,,ira contributions as traditional ,,ira contributions4 ,sec4 #aejb4 ,reduction in minimum age for allowable in-service distributions4 ,sec4 #aejc4 ,modification of rules governing hardship distributions4 ,sec4 #aejd4 ,modification of rules relating to hardship withdrawals from cash or deferred arrangements4 ,sec4 #aeje4 ,extended rollover period for the rollover of plan loan offset amounts in certain cases4 ,sec4 #aejf4 ,modification of nondiscrimination rules to protect older1 longer service participants4 ,subtitle ,g--,estate1 gift1 and generation-skipping transfer taxes ,sec4 #afja4 ,increase in credit against estate1 gift1 and generation-skipping transfer tax4 ,sec4 #afjb4 ,repeal of estate and generation-skipping transfer taxes4 ,title ,,ii--,alternative ,minimum ,tax ,repeal ,sec4 #bjja4 ,repeal of alternative minimum tax4 ,title ,,iii--,business tax reform ,subtitle ,a--,tax rates ,sec4 #cjja4 ,reduction in corporate tax rate4 ,subtitle ,b--,cost recovery ,sec4 #caja4 ,increased expensing4 ,subtitle ,c--,small business reforms ,sec4 #cbja4 ,expansion of section #agi expensing4 ,sec4 #cbjb4 ,small business accounting method reform and simplification4 ,sec4 #cbjc4 ,small business exception from limitation on deduction of business interest4 ,sec4 #cbjd4 ,modification of treatment of ,s corporation conversions to ,c corporations4 ,subtitle ,d--,reform of business-related exclusions1 deductions1 etc4 ,sec4 #ccja4 ,interest4 ,sec4 #ccjb4 ,modification of net operating loss deduction4 ,sec4 #ccjc4 ,like-kind exchanges of real property4 ,sec4 #ccjd4 ,revision of treatment of contributions to capital4 ,sec4 #ccje4 ,repeal of deduction for local lobbying expenses4 ,sec4 #ccjf4 ,repeal of deduction for income attributable to domestic production activities4 ,sec4 #ccjg4 ,entertainment1 etc4 expenses4 ,sec4 #ccjh4 ,unrelated business taxable income increased by amount of certain fringe benefit expenses for which deduction is disallowed4 ,sec4 #ccji4 ,limitation on deduction for ,,fdic premiums4 ,sec4 #ccaj4 ,repeal of rollover of publicly traded securities gain into specialized small business investment companies4 ,sec4 #ccaa4 ,certain self-created property not treated as a capital asset4 ,sec4 #ccab4 ,repeal of special rule for sale or exchange of patents4 ,sec4 #ccac4 ,repeal of technical termination of partnerships4 ,sec4 #ccad4 ,recharacterization of certain gains in the case of partnership profits interests held in connection with performance of investment services4 ,sec4 #ccae4 ,amortization of research and experimental expenditures4 ,sec4 #ccaf4 ,uniform treatment of expenses in contingency fee cases4 ,subtitle ,e--,reform of business credits ,sec4 #cdja4 ,repeal of credit for clinical testing expenses for certain drugs for rare diseases or conditions4 ,sec4 #cdjb4 ,repeal of employer-provided child care credit4 ,sec4 #cdjc4 ,repeal of rehabilitation credit4 ,sec4 #cdjd4 ,repeal of work opportunity tax credit4 ,sec4 #cdje4 ,repeal of deduction for certain unused business credits4 ,sec4 #cdjf4 ,termination of new markets tax credit4 ,sec4 #cdjg4 ,repeal of credit for expenditures to provide access to disabled individuals4 ,sec4 #cdjh4 ,modification of credit for portion of employer social security taxes paid with respect to employee tips4 ,subtitle ,f--,energy credits ,sec4 #ceja4 ,modifications to credit for electricity produced from certain renewable resources4 ,sec4 #cejb4 ,modification of the energy investment tax credit4 ,sec4 #cejc4 ,extension and phaseout of residential energy efficient property4 ,sec4 #cejd4 ,repeal of enhanced oil recovery credit4 ,sec4 #ceje4 ,repeal of credit for producing oil and gas from marginal wells4 ,sec4 #cejf4 ,modifications of credit for production from advanced nuclear power facilities4 ,subtitle ,g--,bond reforms ,sec4 #cfja4 ,termination of private activity bonds4 ,sec4 #cfjb4 ,repeal of advance refunding bonds4 ,sec4 #cfjc4 ,repeal of tax credit bonds4 ,sec4 #cfjd4 ,no tax exempt bonds for professional stadiums4 ,subtitle ,h--,insurance ,sec4 #cgja4 ,net operating losses of life insurance companies4 ,sec4 #cgjb4 ,repeal of small life insurance company deduction4 ,sec4 #cgjc4 ,surtax on life insurance company taxable income4 ,sec4 #cgjd4 ,adjustment for change in computing reserves4 ,sec4 #cgje4 ,repeal of special rule for distributions to shareholders from pre-#aihd policyholders surplus account4 ,sec4 #cgjf4 ,modification of proration rules for property and casualty insurance companies4 ,sec4 #cgjg4 ,modification of discounting rules for property and casualty insurance companies4 ,sec4 #cgjh4 ,repeal of special estimated tax payments4 ,subtitle ,i--,compensation ,sec4 #chja4 ,modification of limitation on excessive employee remuneration4 ,sec4 #chjb4 ,excise tax on excess tax-exempt organization executive compensation4 ,sec4 #chjc4 ,treatment of qualified equity grants4 ,title ,,iv--,taxation of foreign income and foreign persons ,subtitle ,a--,establishment of participation exemption system for taxation of foreign income ,sec4 #djja4 ,deduction for foreign-source portion of dividends received by domestic corporations from specified #aj-percent owned foreign corporations4 ,sec4 #djjb4 ,application of participation exemption to investments in ,united ,states property4 ,sec4 #djjc4 ,limitation on losses with respect to specified #aj-percent owned foreign corporations4 ,sec4 #djjd4 ,treatment of deferred foreign income upon transition to participation exemption system of taxation4 ,subtitle ,b--,modifications related to foreign tax credit system ,sec4 #daja4 ,repeal of section #ijb indirect foreign tax credits2 determination of section #ifj credit on current year basis4 ,sec4 #dajb4 ,source of income from sales of inventory determined solely on basis of production activities4 ,subtitle ,c--,modification of subpart ,f provisions ,sec4 #dbja4 ,repeal of inclusion based on withdrawal of previously excluded subpart ,f income from qualified investment4 ,sec4 #dbjb4 ,repeal of treatment of foreign base company oil related income as subpart ,f income4 ,sec4 #dbjc4 ,inflation adjustment of de minimis exception for foreign base company income4 ,sec4 #dbjd4 ,look-thru rule for related controlled foreign corporations made permanent4 ,sec4 #dbje4 ,modification of stock attribution rules for determining status as a controlled foreign corporation4 ,sec4 #dbjf4 ,elimination of requirement that corporation must be controlled for #cj days before subpart ,f inclusions apply4 ,subtitle ,d--,prevention of base erosion ,sec4 #dcja4 ,current year inclusion by ,united ,states shareholders with foreign high returns4 ,sec4 #dcjb4 ,limitation on deduction of interest by domestic corporations which are members of an international financial reporting group4 ,sec4 #dcjc4 ,excise tax on certain payments from domestic corporations to related foreign corporations2 election to treat such payments as effectively connected income4 ,subtitle ,e--,provisions related to possessions of the ,united ,states ,sec4 #ddja4 ,extension of deduction allowable with respect to income attributable to domestic production activities in ,puerto ,rico4 ,sec4 #ddjb4 ,extension of temporary increase in limit on cover over of rum excise taxes to ,puerto ,rico and the ,virgin ,islands4 ,sec4 #ddjc4 ,extension of ,american ,samoa economic development credit4 ,subtitle ,f--,other international reforms ,sec4 #deja4 ,restriction on insurance business exception to passive foreign investment company rules4 ,title ,v--,exempt organizations ,subtitle ,a--,unrelated ,business ,income ,tax ,sec4 #ejja4 ,clarification of unrelated business income tax treatment of entities treated as exempt from taxation under section #eja7;a74 ,sec4 #ejjb4 ,exclusion of research income limited to publicly available research4 ,subtitle ,b--,excise ,taxes ,sec4 #eaja4 ,simplification of excise tax on private foundation investment income4 ,sec4 #eajb4 ,private operating foundation requirements relating to operation of art museum4 ,sec4 #eajc4 ,excise tax based on investment income of private colleges and universities4 ,sec4 #eajd4 ,exception from private foundation excess business holding tax for independently-operated philanthropic business holdings4 ,subtitle ,c--,requirements for organizations exempt from tax ,sec4 #ebja4 #eja7;c77#c7 organizations permitted to make statements relating to political campaign in ordinary course of activities4 ,sec4 #ebjb4 ,additional reporting requirements for donor advised fund sponsoring organizations4 ,i ,tax reform for individuals ,a ,simplification and reform of rates1 standard deduction1 and exemptions #ajja4 ,reduction and simplification of individual income tax rates 7a7 ,in general ,section #a is amended by striking subsection 7i7 and by striking all that precedes subsection 7h7 and inserting the following3 #a4 ,tax imposed 7a7 ,in general ,there is hereby imposed on the income of every individual a tax equal to the sum of-- 7#a7 #ab percent bracket #ab percent of so much of the taxable income as does not exceed the #be-percent bracket threshold amount1 7#b7 #be percent bracket #be percent of so much of the taxable income as exceeds the #be-percent bracket threshold amount but does not exceed the #ce-percent bracket threshold amount1 plus 7#c7 #ce percent bracket #ce percent of so much of taxable income as exceeds the #ce-percent bracket threshold amount but does not exceed the #ci4f percent bracket threshold amount4 7#d7 #ci4f percent bracket #ci4f percent of so much of taxable income as exceeds the #ci4f-percent bracket threshold amount4 7b7 ,bracket threshold amounts ,for purposes of this section-- 7#a7 #be-percent bracket threshold amount ,the term #be-percent bracket threshold amount means-- 7,a7 in the case of a joint return or surviving spouse1 #ij1jjj1 7,b7 in the case of an individual who is the head of a household 7as defined in section #b7;b771 #fg1ejj1 7,c7 in the case of any other individual 7other than an estate or trust71 an amount equal to of the amount in effect for the taxable year under subparagraph 7,a71 and 7,d7 in the case of an estate or trust1 #b1eej4 7#b7 #ce-percent bracket threshold amount ,the term #ce-percent bracket threshold amount means-- 7,a7 in the case of a joint return or surviving spouse1 #bfj1jjj1 7,b7 in the case of a married individual filing a separate return1 an amount equal to of the amount in effect for the taxable year under subparagraph 7,a71 and 7,c7 in the case of any other individual 7other than an estate or trust71 #bjj1jjj1 and 7,d7 in the case of an estate or trust1 #i1aej4 7#c7 #ci4f-percent bracket threshold amount ,the term #ci4f-percent bracket threshold amount means-- 7,a7 in the case of a joint return or surviving spouse1 #a1jjj1jjj1 7,b7 in the case of any other individual 7other than an estate or trust71 an amount equal to of the amount in effect for the taxable year under subparagraph 7,a71 and 7,c7 in the case of an estate or trust1 #ab1ejj4 7c7 ,inflation adjustment 7#a7 ,in general ,in the case of any taxable year beginning after #bjah1 each dollar amount in subsections 7b7 and 7e77#c7 7other than any amount determined by reference to such a dollar amount7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under this subsection for the calendar year in which the taxable year begins by substituting #bjag for #bjaf in paragraph 7#b77;,a77ii74 ,if any increase determined under the preceding sentence is not a multiple of #ajj1 such increase shall be rounded to the next lowest multiple of #ajj4 7#b7 ,cost-of-living adjustment ,for purposes of this subsection-- 7,a7 ,in general ,the cost-of-living adjustment for any calendar year is the percentage 7if any7 by which-- 7i7 the ,c-,,cpi-,u for the preceding calendar year1 exceeds 7ii7 the normalized ,,cpi for calendar year #bjaf4 7,b7 ,special rule for adjustments with a base year after #bjaf ,for purposes of any provision which provides for the substitution of a year after #bjaf for #bjaf in subparagraph 7,a77ii71 subparagraph 7,a7 shall be applied by substituting ,c-,,cpi-,u for normalized ,,cpi in clause 7ii74 7#c7 ,normalized ,,cpi ,for purposes of this subsection1 the normalized ,,cpi for any calendar year is the product of-- 7,a7 the ,,cpi for such calendar year1 multiplied by 7,b7 the ,c-,,cpi-,u transition multiple4 7#d7 ,c-,,cpi-,u transition multiple ,for purposes of this subsection1 the term ,c-,,cpi-,u transition multiple means the amount obtained by dividing-- 7,a7 the ,c-,,cpi-,u for calendar year #bjaf1 by 7,b7 the ,,cpi for calendar year #bjaf4 7#e7 ,c-,,cpi-,u ,for purposes of this subsection-- 7,a7 ,in general ,the term ,c-,,cpi-,u means the ,chained ,consumer ,price ,index for ,all ,urban ,consumers 7as published by the ,bureau of ,labor ,statistics of the ,department of ,labor74 ,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 year4 7,b7 ,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 #ab-month period ending on ,august #ca of such calendar year4 7#f7 ,,cpi ,for purposes of this subsection-- 7,a7 ,in general ,the term ,consumer ,price ,index means the last ,consumer ,price ,index for ,all ,urban ,consumers published by the ,department of ,labor4 ,for purposes of the preceding sentence1 the revision of the ,consumer ,price ,index which is most consistent with the ,consumer ,price ,index for calendar year #aihf shall be used4 7,b7 ,determination for calendar year ,the ,,cpi for any calendar year is the average of the ,consumer ,price ,index as of the close of the #ab-month period ending on ,august #ca of such calendar year4 7d7 ,special rules for certain children with unearned income 7#a7 ,in general ,in the case of any child to whom this subsection applies for any taxable year-- 7,a7 the #be-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 child1 and 7,b7 the #ce-percent bracket threshold amount shall not be more than the sum of-- 7i7 the taxable income of such child for the taxable year reduced by the net unearned income of such child1 plus 7ii7 the dollar amount in effect under subsection 7b77#b77;,d7 for the taxable year4 7,c7 the #ci4f-percent bracket threshold amount shall not be more than the sum of-- 7i7 the taxable income of such child for the taxable year reduced by the net unearned income of such child1 plus 7ii7 the dollar amount in effect under subsection 7b77#c77;,c74 7#b7 ,child to whom subsection applies ,this subsection shall apply to any child for any taxable year if-- 7,a7 such child-- 7i7 has not attained age #ah before the close of the taxable year1 or 7ii7 has attained age #ah before the close of the taxable year and is described in paragraph 7#c71 7,b7 either parent of such child is alive at the close of the taxable year1 and 7,c7 such child does not file a joint return for the taxable year4 7#c7 ,certain children whose earned income does not exceed one-half of individual's support ,a child is described in this paragraph if-- 7,a7 such child-- 7i7 has not attained age #ai before the close of the taxable year1 or 7ii7 is a student 7within the meaning of section #ggjf7;f77#b77 who has not attained age #bd before the close of the taxable year1 and 7,b7 such child's earned income 7as defined in section #iaa7;d77#b77 for such taxable year does not exceed one-half of the amount of the individual's support 7within the meaning of section #ggjf7;c77#a77;,d7 after the application of section #ggjf7;f77#e7 7without regard to subparagraph 7,a7 thereof77 for such taxable year4 7#d7 ,net unearned income ,for purposes of this subsection-- 7,a7 ,in general ,the term net unearned income means the excess of-- 7i7 the portion of the adjusted gross income for the taxable year which is not attributable to earned income 7as defined in section #iaa7;d77#b771 over 7ii7 the sum of-- 7,i7 the amount in effect for the taxable year under section #fc7;c77#b77;,a7 7relating to limitation on standard deduction in the case of certain dependents71 plus 7,,ii7 ,the greater of the amount described in subclause 7,i7 or1 if the child itemizes his deductions for the taxable year1 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 7i74 7,b7 ,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 year4 7e7 ,phaseout of #ab-percent rate 7#a7 ,in general ,the amount of tax imposed by this section 7determined without regard to this subsection7 shall be increased by #f percent of the excess 7if any7 of-- 7,a7 adjusted gross income1 over 7,b7 the applicable dollar amount4 7#b7 ,limitation ,the increase determined under paragraph 7#a7 with respect to any taxpayer for any taxable year shall not exceed #bg4f percent of the lesser of-- 7,a7 the taxpayer's taxable income for such taxable year1 or 7,b7 the #be-percent bracket threshold amount in effect with respect to the taxpayer for such taxable year4 7#c7 ,applicable dollar amount ,for purposes of this subsection1 the term applicable dollar amount means-- 7,a7 in the case of a joint return or a surviving spouse1 #a1bjj1jjj1 7,b7 in the case of a married individual filing a separate return1 an amount equal to #a_/b of the amount in effect for the taxable year under subparagraph 7,a71 and 7,c7 in the case of any other individual1 #a1jjj1jjj4 7#d7 ,estates and trusts ,paragraph 7#a7 shall not apply in the case of an estate or trust4 4 7b7 ,application of current income tax brackets to capital gains brackets 7#a7 ,in general 7,a7 #j-percent capital gains bracket ,section #a7;h77#a7 is amended by striking which would 7without regard to this paragraph7 be taxed at a rate below #be percent in subparagraph 7,b77i7 and inserting below the #ae-percent rate threshold4 7,b7 #ae-percent capital gains bracket ,section #a7;h77#a77;,c77ii77,i7 is amended by striking which would 7without regard to this paragraph7 be taxed at a rate below #ci4f percent and inserting below the #bj-percent rate threshold4 7#b7 ,rate thresholds defined ,section #a7;h7 is amended by adding at the end the following new paragraph3 7#ab7 ,rate thresholds defined ,for purposes of this subsection-- 7,a7 #ae-percent rate threshold ,the #ae-percent rate threshold shall be-- 7i7 in the case of a joint return or surviving spouse1 #gg1bjj 7 such amount in the case of a married individual filing a separate return71 7ii7 in the case of an individual who is the head of a household 7as defined in section #b7;b771 #ea1gjj1 7iii7 in the case of any other individual 7other than an estate or trust71 an amount equal to of the amount in effect for the taxable year under clause 7i71 and 7iv7 in the case of an estate or trust1 #b1fjj4 7,b7 #bj-percent rate threshold ,the #bj-percent rate threshold shall be-- 7i7 in the case of a joint return or surviving spouse1 #dgi1jjj 7 such amount in the case of a married individual filing a separate return71 7ii7 in the case of an individual who is the head of a household 7as defined in section #b7;b771 #deb1djj1 7iii7 in the case of any other individual 7other than an estate or trust71 #dbe1hjj1 and 7iv7 in the case of an estate or trust1 #ab1gjj4 7,c7 ,inflation adjustment ,in the case of any taxable year beginning after #bjah1 each of the dollar amounts in subparagraphs 7,a7 and 7,b7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under subsection 7c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjag for calendar year #bjaf in clause 7ii7 thereof4 4 7c7 ,application of section #ae 7#a7 ,in general ,subsection 7a7 of section #ae is amended by striking by this chapter and inserting by section #aa 7or by reference to any such rates74 7#b7 ,conforming amendments 7,a7 ,section #ae is amended by striking subsections 7d7 and 7f7 and by redesignating subsection 7e7 as subsection 7d74 7,b7 ,section #ae7;d71 as redesignated by subparagraph 7,a71 is amended by striking section #a or #aa7;b7 and inserting section #aa7;b74 7,c7 ,section #fjac7;c7 is amended by striking sections #ae1 #ddc1 and #ghea7;a77#a77;,a7 and inserting sections #ddc and #ghea7;a77#a77;,a74 7#c7 ,application to this ,act ,section #ae of the ,internal ,revenue ,code of #aihf shall not apply to any change in a rate of tax imposed by chapter #a of such ,code which occurs by reason of any amendment made by this ,act 7other than the amendments made by section #cjja74 7d7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7#b7 ,subsection 7c7 ,the amendments made by subsection 7c7 shall take effect on the date of the enactment of this ,act4 #ajjb4 ,enhancement of standard deduction 7a7 ,increase in standard deduction ,section #fc7;c7 is amended to read as follows3 7c7 ,standard deduction ,for purposes of this subtitle-- 7#a7 ,in general ,except as otherwise provided in this subsection1 the term standard deduction means-- 7,a7 #bd1djj1 in the case of a joint return 7or a surviving spouse 7as defined in section #b7;a771 7,b7 three-quarters of the amount in effect under subparagraph 7,a7 for the taxable year1 in the case of the head of a household 7as defined in section #b7;b771 and 7,c7 one-half of the amount in effect under subparagraph 7,a7 for the taxable year1 in any other case4 7#b7 ,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 begins1 the standard deduction applicable to such individual for such individual's taxable year shall not exceed the greater of-- 7,a7 #ejj1 or 7,b7 the sum of #bej and such individual's earned income 7within the means of section #cb74 7#c7 ,certain individuals1 etc41 not eligible for standard deduction ,in the case of-- 7,a7 a married individual filing a separate return where either spouse itemizes deductions1 7,b7 a nonresident alien individual1 7,c7 an individual making a return under section #ddc7;a77#a7 for a period of less than #ab months on account of a change in his annual accounting period1 or 7,d7 an estate or trust1 common trust fund1 or partnership1 the standard deduction shall be zero4 7#d7 ,unmarried individual ,for purposes of this section1 the term unmarried individual means any individual who-- 7,a7 is not married as of the close of the taxable year 7as determined by applying section #ggjc71 7,b7 is not a surviving spouse 7as defined in section #b7;a77 for the taxable year1 and 7,c7 is not a dependent of another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins4 7#e7 ,inflation adjustments 7,a7 ,standard deduction amount ,in the case of any taxable year beginning after #bjai1 the dollar amount in paragraph 7#a77;,a7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjah for calendar year #bjaf in clause 7ii7 thereof4 7,b7 ,limitation amount in case of certain dependents ,in the case of any taxable year beginning after #bjag1 each of the dollar amounts in paragraph 7#b7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 7,i7 in the case of the dollar amount in paragraph 7#b77;,a71 under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins determined by substituting calendar year #aihg for calendar year #bjaf in clause 7ii7 thereof1 and 7,,ii7 in the case of the dollar amount in paragraph 7#b77;,b71 under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins determined by substituting calendar year #aiig for calendar year #bjaf in clause 7ii7 thereof4 ,if any increase determined under this paragraph is not a multiple of #ajj1 such increase shall be rounded to the next lowest multiple of #ajj4 4 7b7 ,conforming amendments 7#a7 ,section #fc7;b7 is amended by striking 1 minus-- and all that follows and inserting minus the standard deduction4 7#b7 ,section #fc is amended by striking subsections 7f7 and 7g74 7#c7 ,section #acih7;c7 is amended-- 7,a7 by striking ,basic in the heading thereof1 7,b7 by striking ,basic standard in the heading of paragraph 7#c7 and inserting ,standard1 and 7,c7 by striking basic in paragraph 7#c74 7#d7 ,section #cdjb7m77#c7 is amended by striking 7including the additional standard deduction under section #fc7;c77#c7 for the aged and blind74 7#e7 ,section #fjad7;b77#d7 is amended by striking section #fc7;c77#e7 and inserting section #fc7;c77#b74 7c7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #ajjc4 ,repeal of deduction for personal exemptions 7a7 ,in general ,part ,v of subchapter ,b of chapter #a is hereby repealed4 7b7 ,definition of dependent retained ,section #aeb1 prior to repeal by subsection 7a71 is hereby redesignated as section #ggjf and moved to the end of chapter #gi4 7c7 ,application to estates and trusts ,subsection 7b7 of section #fdb is amended-- 7#a7 by striking paragraph 7#b77;,c71 7#b7 by striking paragraph 7#c71 and 7#c7 by striking ,deduction for personal exemption in the heading thereof and inserting ,basic deduction4 7d7 ,application to nonresident aliens ,section #hgc7;b7 is amended by striking paragraph 7#c74 7e7 ,modification of wage withholding rules 7#a7 ,in general ,section #cdjb7;a7 is amended by striking paragraph 7#b74 7#b7 ,conforming amendment ,section #cdjb7;a7 is amended-- 7,a7 by redesignating subparagraphs 7,a7 and 7,b7 of paragraph 7#a7 as paragraphs 7#a7 and 7#b7 and moving such redesignated paragraphs #b ems to the left1 and 7,b7 by striking all that precedes otherwise provided in this section and inserting the following3 7a7 ,requirement of withholding ,except as 4 7#c7 ,number of exemptions ,section #cdjb7;f77#a7 is amended-- 7,a7 in subparagraph 7,a71 by striking an individual described in section #aea7;d77#b7 and inserting a dependent of any other taxpayer1 and 7,b7 in subparagraph 7,c71 by striking with respect to whom1 on the basis of facts existing at the beginning of such day1 there may reasonably be expected to be allowable an exemption under section #aea7;c7 and inserting who1 on the basis of facts existing at the beginning of such day1 is reasonably expected to be a dependent of the employee4 7f7 ,modification of return requirement 7#a7 ,in general ,paragraph 7#a7 of section #fjab7;a7 is amended to read as follows3 7#a7 ,every individual who has gross income for the taxable year1 except that a return shall not be required of-- 7,a7 an individual who is not married 7determined by applying section #ggjc7 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 #fc1 or 7,b7 an individual entitled to make a joint return if-- 7i7 the gross income of such individual1 when combined with the gross income of such individual's spouse1 for the taxable year does not exceed the standard deduction which would be applicable to the taxpayer for such taxable year under section #fc if such individual and such individual's spouse made a joint return1 7ii7 such individual and such individual's spouse have the same household as their home at the close of the taxable year1 7iii7 such individual's spouse does not make a separate return1 and 7iv7 neither such individual nor such individual's spouse is an individual described in section #fc7;c77#b7 who has income 7other than earned income7 in excess of the amount in effect under section #fc7;c77#b77;,a74 4 7#b7 ,bankruptcy estates ,paragraph 7#h7 of section #fjab7;a7 is amended by striking the sum of the exemption amount plus the basic standard deduction under section #fc7;c77#b77;,d7 and inserting the standard deduction in effect under section #fc7;c77#a77;,b74 7g7 ,conforming amendments 7#a7 ,section #b7;a77#a77;,b7 is amended by striking a dependent and all that follows through section #aea and inserting a dependent who 7within the meaning of section #ggjf1 determined without regard to subsections 7b77#a71 7b77#b7 and 7d77#a77;,b7 thereof7 is a son1 stepson1 daughter1 or stepdaughter of the taxpayer4 7#b7 ,section #cf;,b7b77#b77;,a7 is amended by striking section #aeb and inserting section #ggjf4 7#c7 ,section #cf;,b7b77#c77;,b7 is amended by striking unless a deduction is allowed under section #aea 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 year4 7#d7 ,section #cf;,b7c77#a77;,d7 is amended by striking with respect to whom a deduction under section #aea is allowable to another taxpayer and inserting who is a dependent of another taxpayer4 7#e7 ,section #cf;,b7d77#a7 is amended by striking equal to the number of individuals for whom the taxpayer is allowed a deduction under section #aea 7relating to allowance of deduction for personal exemptions7 for the taxable year and inserting the sum of #a 7#b in the case of a joint return7 plus the number of the taxpayer's dependents for the taxable year4 7#f7 ,section #cf;,b7e77#a7 is amended by striking #a or more individuals for whom a taxpayer is allowed a deduction under section #aea 7relating to allowance of deduction for personal exemptions7 for the taxable year 7including the taxpayer or his spouse7 and inserting #a or more of the taxpayer1 the taxpayer's spouse1 or any dependent of the taxpayer4 7#g7 ,section #db7;i77#c77;,d77ii77,i7 is amended-- 7,a7 by striking section #aeb and inserting section #ggjf1 and 7,b7 by striking the period at the end and inserting a comma4 7#h7 ,section #gb7t77#b77;,d77i77,,iii7 is amended by striking section #aeb and inserting section #ggjf4 7#i7 ,section #gb7t77#g77;,a77iii7 is amended by striking section #aeb7;f77#a7 and inserting section #ggjf7;f77#a74 7#aj7 ,section #aje7;b7 is amended-- 7,a7 by striking as defined in section #aeb and inserting as defined in section #ggjf1 7,b7 by striking section #aeb7;f77#a7 and inserting section #ggjf7;f77#a7 and 7,c7 by striking section #aeb7;e7 and inserting section #ggjf7;e74 7#aa7 ,section #aje7;c77#a7 is amended by striking section #aeb and inserting section #ggjf4 7#ab7 ,section #abe7;e77#a77;,d7 is amended by striking section #aeb and inserting section #ggjf4 7#ac7 ,section #acb7;h77#b77;,b7 is amended-- 7,a7 by striking section #aeb7;f77#a7 and inserting section #ggjf7;f77#a71 and 7,b7 by striking section #aeb7;e7 and inserting section #ggjf7;e74 7#ad7 ,section #aci;,d7c77#e7 is amended by striking section #aeb and inserting section #ggjf4 7#ae7 ,section #afb7l77#a77;,d7 is amended by striking section #aeb7;f77#a7 and inserting section #ggjf7;f77#a74 7#af7 ,section #agj7;g77#a7 is amended by striking section #aeb and inserting section #ggjf4 7#ag7 ,section #agj7;g77#c7 is amended by striking section #aeb7;d77#b7 and inserting section #ggjf7;d77#b74 7#ah7 ,section #agb7;d7 is amended by striking paragraph 7#c74 7#ai7 ,section #bbj7;b77#f7 is amended by striking with respect to whom a deduction under section #aea is allowable to and inserting who is a dependent of4 7#bj7 ,section #bbj7;d77#b77;,a7 is amended by striking section #aeb and inserting section #ggjf4 7#ba7 ,section #bbc7;b77#f7 is amended by striking with respect to whom a deduction under section #aea is allowable to and inserting who is a dependent of4 7#bb7 ,section #bbc7;d77#b77;,a7 is amended by striking section #aeb and inserting section #ggjf4 7#bc7 ,section #dja7;h7 is amended by striking section #aeb7;f77#a7 in the last sentence and inserting section #ggjf7;f77#a74 7#bd7 ,section #djb7l77#d77;,d7 is amended by striking section #aeb and inserting section #ggjf4 7#be7 ,section #dji;,a7a77#b77;,b77ii77,i7 is amended by striking section #aeb7;a7 and inserting section #ggjf7;a74 7#bf7 ,section #eja7;c77#i7 is amended by striking section #aeb7;f77#a7 and inserting section #ggjf7;f77#a74 7#bg7 ,section #ebi7;e77#b77;,b7 is amended by striking section #aeb7;d77#b7 and inserting section #ggjf7;d77#b74 7#bh7 ,section #gjc7;a77#b7 is amended by striking subparagraph 7,a7 and by redesignating subparagraphs 7,b7 through 7,f7 as subparagraphs 7,a7 through 7,e71 respectively4 7#bi7 ,section #hgd is amended by striking subsection 7b7 and by redesignating subsection 7c7 as subsection 7b74 7#cj7 ,section #hia is amended by striking under section #aea and4 7#ca7 ,section #ijd7;b7 is amended by striking paragraph 7#a74 7#cb7 ,section #ica7;b77#a7 is amended by striking 7other than the deduction under section #aea1 relating to personal exemptions74 7#cc7 ,section #icc is amended-- 7,a7 by striking 7other than the deduction under section #aea1 relating to personal exemptions7 in paragraph 7#a71 and 7,b7 by striking 7other than the deduction for personal exemptions under section #aea7 in paragraph 7#b74 7#cd7 ,section #abab7;b77#b77;,b77ii7 is amended to read as follows3 7ii7 in the case of an estate or trust1 the deduction allowed for such year under section #fdb7;b74 4 7#ce7 ,section #acfa7;c77#a77;,c7 is amended by striking section #aeb7;f77#a77;,c7 and inserting section #ggjf7;f77#a77;,c74 7#cf7 ,section #adjb7;a7 is amended by striking paragraph 7#g74 7#cg7 ,section #bjcb;,a7c77#g77;,d7 is amended by striking section #aeb7;f77#b7 and inserting section #ggjf7;f77#b74 7#ch7 ,section #cdjb7m77#a7 is amended by striking other than the deductions referred to in section #aea and4 7#ci7 ,section #cdjb7r77#b7 is amended by striking the sum of-- and all that follows and inserting the standard deduction in effect under section #fc7;c77#a77;,b744 7#dj7 ,section #ejjj;,a7b77#c77;,a7 is amended by striking section #aeb and inserting section #ggjf4 7#da7 ,section #ejjj;,a7c77#d77;,a7 is amended by striking the number of individuals for whom the taxpayer is allowed a deduction under section #aea 7relating to allowance of deduction for personal exemptions7 for the taxable year and inserting the sum of #a 7#b in the case of a joint return7 plus the number of the taxpayer's dependents for the taxable year4 7#db7 ,section #fjac7;b77#c77;,a7 is amended-- 7,a7 by striking had less than the exemption amount of gross income in clause 7ii7 and inserting had no gross income1 7,b7 by striking had gross income of the exemption amount or more in clause 7iii7 and inserting had any gross income1 and 7,c7 by striking the flush language following clause 7iii74 7#dc7 ,section #fajc7l77#ba77;,a77iii7 is amended to read as follows3 7iii7 the number of the taxpayer's dependents1 4 7#dd7 ,section #fbac7;g77#b7 is amended by striking subparagraph 7,h74 7#de7 ,section #fccd7;d77#b7 is amended to read as follows3 7#b7 ,exempt amount 7,a7 ,in general ,for purposes of paragraph 7#a71 the term exempt amount means an amount equal to-- 7i7 the standard deduction1 divided by 7ii7 #eb4 7,b7 ,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 7,a71 subparagraph 7,a7 shall be applied as if the taxpayer were a married individual filing a separate return with no dependents4 4 7#df7 ,section #ggjb;,b7f77#b77;,c77iii7 is amended by striking section #aeb7;d77#b7 and inserting section #ggjf7;d77#b74 7#dg7 ,section #ggjc7;a7 is amended by striking part ,v of subchapter ,b of chapter #a and4 7#dh7 ,section #ggjc7;b77#a7 is amended by striking section #aeb7;f77#a7 and all that follows and inserting section #ggjf7;f77#a714 7#di7 ,section #ggjf7;a71 as redesignated by this section1 is amended by striking this subtitle and inserting subtitle ,a4 7#ej7 7,a7 ,section #ggjf7;d77#a77;,b71 as redesignated by this section1 is amended by striking the exemption amount 7as defined in section #aea7;d77 and inserting #d1aej4 7,b7 ,section #ggjf7;d71 as redesignated by this section1 is amended by adding at the end the following new paragraph3 7#f7 ,inflation adjustment ,in the case of any calendar year beginning after #bjah1 the #d1aej amount in paragraph 7#a77;,b7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjag for calendar year #bjaf in clause 7ii7 thereof4 ,if any increase determined under the preceding sentence is not a multiple of #ajj1 such increase shall be rounded to the next lowest multiple of #ajj4 4 7#ea7 ,the table of sections for chapter #gi is amended by adding at the end the following new item3 ,sec4 #ggjf4 ,dependent defined4 4 7h7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #ajjd4 ,maximum rate on business income of individuals 7a7 ,in general ,part ,i of subchapter ,a of chapter #a is amended by inserting after section #c the following new section3 #d4 #be percent maximum rate on business income of individuals 7a7 ,reduction in tax to achieve #be percent maximum rate ,the tax imposed by section #a shall be reduced by the sum of-- 7#a7 #aj percent of the lesser of-- 7,a7 qualified business income1 or 7,b7 the excess 7if any7 of-- 7i7 taxable income reduced by net capital gain 7as defined in section #a7;h77#aa77;,a771 over 7ii7 the maximum dollar amount for the #be-percent rate bracket which applies to the taxpayer under section #a for the taxable year1 and 7#b7 #d4f percent of the excess 7if any7 of-- 7,a7 the lesser of-- 7i7 qualified business income1 or 7ii7 the excess 7if any7 determined under paragraph 7#a77;,b71 over 7,b7 the excess of-- 7i7 the maximum dollar amount for the #ce-percent rate bracket which applies to the taxpayer under section #a for the taxable year1 over 7ii7 the maximum dollar amount for the #be-percent rate bracket which applies to the taxpayer under section #a for the taxable year4 7b7 ,qualified business income ,for purposes of this section1 the term qualified business income means the excess 7if any7 of-- 7#a7 the sum of-- 7,a7 #ajj percent of any net business income derived from any passive business activity1 plus 7,b7 the capital percentage of any net business income derived from any active business activity1 over 7#b7 the sum of-- 7,a7 #ajj percent of any net business loss derived from any passive business activity1 7,b7 except as provided in subsection 7e77#c77;,a71 #cj percent of any net business loss derived from any active business activity1 plus 7,c7 any carryover business loss determined for the preceding taxable year4 7c7 ,determination of net business income or loss ,for purposes of this section-- 7#a7 ,in general ,net business income or loss shall be determined with respect to any business activity by appropriately netting items of income1 gain1 deduction1 and loss with respect to such business activity4 7#b7 ,wages1 etc ,any wages 7as defined in section #cdja71 payments described in subsection 7a7 or 7c7 of section #gjg1 or directors' fees received by the taxpayer which are properly attributable to any business activity shall be taken into account under paragraph 7#a7 as an item of income with respect to such business activity4 7#c7 ,exception for certain investment-related items ,there shall not be taken into account under paragraph 7#a7-- 7,a7 any item of short-term capital gain1 short-term capital loss1 long-term capital gain1 or long-term capital loss1 7,b7 any dividend1 income equivalent to a dividend1 or payment in lieu of dividends described in section #ied7;c77#a77;,g71 7,c7 any interest income other than interest income which is properly allocable to a trade or business1 7,d7 any item of gain or loss described in subparagraph 7,c7 or 7,d7 of section #ied7;c77#a7 7applied by substituting business activity for controlled foreign corporation71 7,e7 any item of income1 gain1 deduction1 or loss taken into account under section #ied7;c77#a77;,f7 7determined without regard to clause 7ii7 thereof and other than items attributable to notional principal contracts entered into in transactions qualifying under section #abba7;a77#g771 7,f7 any amount received from an annuity which is not received in connection with the trade or business of the business activity1 and 7,g7 any item of deduction or loss properly allocable to an amount described in any of the preceding subparagraphs4 7#d7 ,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 income1 gain1 deduction1 or loss to the extent such amount affects the determination of taxable income for the taxable year4 7#e7 ,carryover business loss ,for purposes of subsection 7b77#b77;,c71 the carryover business loss determined for any taxable year is the excess 7if any7 of the sum described in subsection 7b77#b7 over the sum described in subsection 7b77#a7 for such taxable year4 7d7 ,passive and active business activity ,for purposes of this section-- 7#a7 ,passive business activity ,the term passive business activity means any passive activity as defined in section #dfi7;c7 determined without regard to paragraphs 7#c7 and 7#f77;,b7 thereof4 7#b7 ,active business activity ,the term active business activity means any business activity which is not a passive business activity4 7#c7 ,business activity ,the term business activity means any activity 7within the meaning of section #dfi7 which involves the conduct of any trade or business4 7e7 ,capital percentage ,for purposes of this section-- 7#a7 ,in general ,except as otherwise provided in this section1 the term capital percentage means #cj percent4 7#b7 ,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 7other than a specified service activity71 the capital percentage shall be equal to the applicable percentage 7as defined in subsection 7f77 for each taxable year with respect to which such election applies4 ,any election made under this paragraph shall apply to the taxable year for which such election is made and each of the #d subsequent taxable years4 ,such election shall be made not later than the due date 7including extensions7 for the return of tax for the taxable year for which such election is made1 and1 once made1 may not be revoked4 7#c7 ,treatment of specified service activities 7,a7 ,in general ,in the case of any active business activity which is a specified service activity-- 7i7 the capital percentage shall be #j percent1 and 7ii7 subsection 7b77#b77;,b7 shall be applied by substituting #j percent for #cj percent4 7,b7 ,exception for capital-intensive specified service activities ,if-- 7i7 the taxpayer elects the application of this subparagraph with respect to such activity for any taxable year1 and 7ii7 the applicable percentage 7as defined in subsection 7f77 with respect to such activity for such taxable year is at least #aj percent1 then subparagraph 7,a7 shall not apply and the capital percentage with respect to such activity shall be equal to such applicable percentage4 7,c7 ,specified service activity ,the term specified service activity means any activity involving the performance of services described in section #abjb7;e77#c77;,a71 including investing1 trading1 or dealing in securities 7as defined in section #dge7;c77#b771 partnership interests1 or commodities 7as defined in section #dge7;e77#b774 7#d7 ,reduction in capital percentage in certain cases ,the capital percentage 7determined after the application of paragraphs 7#b7 and 7#c77 with respect to any active business activity shall not exceed #a minus the quotient 7not greater than #a7 of-- 7,a7 any amounts described in subsection 7c77#b7 which are taken into account in determining the net business income derived from such activity1 divided by 7,b7 such net business income4 7f7 ,applicable percentage ,for purposes of this section-- 7#a7 ,in general ,the term applicable percentage means1 with respect to any active business activity for any taxable year1 the quotient 7not greater than #a7 of-- 7,a7 the specified return on capital with respect to such activity for such taxable year1 divided by 7,b7 the taxpayer's net business income derived from such activity for such taxable year4 7#b7 ,specified return on capital ,the term specified return on capital means1 with respect to any active business activity referred to in paragraph 7#a71 the excess of-- 7,a7 the product of-- 7i7 the deemed rate of return for the taxable year1 multiplied by 7ii7 the asset balance with respect to such activity for such taxable year1 over 7,b7 an amount equal to the interest which is paid or accrued1 and for which a deduction is allowed under this chapter1 with respect to such activity for such taxable year4 7#c7 ,deemed rate of return ,the term deemed rate of return means1 with respect to any taxable year1 the ,federal short-term rate 7determined under section #abgd7;d7 for the month in which or with which such taxable year ends7 plus #g percentage points4 7#d7 ,asset balance 7,a7 ,in general ,the asset balance with respect to any active business activity referred to in paragraph 7#a7 for any taxable year equals the taxpayer's adjusted basis of any property described in section #abba7;a77#b7 which is used in connection with such activity as of the end of the taxable year 7determined without regard to sections #afh7k7 and #agi74 7,b7 ,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 corporation1 the taxpayer shall take into account such taxpayer's distributive or pro rata share 7as the case may be7 of the asset balance with respect to such activity as determined with respect to such partnership or ,s corporation under subparagraph 7,a7 7applied by substituting the partnership's or ,s corporation's adjusted basis for the taxpayer's adjusted basis74 7g7 ,reduced rate for small businesses with net active business income 7#a7 ,in general ,the tax imposed by section #a shall be reduced by #c percent of the excess 7if any7 of-- 7,a7 the least of-- 7i7 qualified active business income1 7ii7 taxable income reduced by net capital gain 7as defined in section #a7;h77#aa77;,a771 or 7iii7 the #i-percent bracket threshold amount1 over 7,b7 the excess 7if any7 of taxable income over the applicable threshold amount4 7#b7 ,phase-in of rate reduction ,in the case of any taxable year beginning before ,january #a1 #bjbb1 paragraph 7#a7 shall be applied by substituting for #c percent-- 7,a7 in the case of any taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbj1 #a percent1 and 7,b7 in the case of any taxable year beginning after ,december #ca1 #bjai1 and before ,january #a1 #bjbb1 #b percent4 7#c7 ,qualified active business income ,for purposes of this subsection1 the term qualified active business income means the excess 7if any7 of-- 7,a7 any net business income derived from any active business activity1 over 7,b7 any net business loss derived from any active business activity4 7#d7 #i-percent bracket threshold amount ,for purposes of this subsection1 the term #i-percent bracket threshold amount means-- 7,a7 in the case of a joint return or surviving spouse1 #ge1jjj1 7,b7 in the case of an individual who is the head of a household 7as defined in section #b7;b771 #c_/d of the amount in effect for the taxable year under subparagraph 7,a71 and 7,c7 in the case of any other individual1 #a_/b of the amount in effect for the taxable year under subparagraph 7,a74 7#e7 ,applicable threshold amount ,for purposes of this subsection1 the term applicable threshold amount means-- 7,a7 in the case of a joint return or surviving spouse1 #aej1jjj1 7,b7 in the case of an individual who is the head of a household 7as defined in section #b7;b771 #c_/d of the amount in effect for the taxable year under subparagraph 7,a71 and 7,c7 in the case of any other individual1 #a_/b of the amount in effect for the taxable year under subparagraph 7,a74 7#f7 ,estates and trusts ,paragraph 7#a7 shall not apply to any estate or trust4 7#g7 ,inflation adjustment ,in the case of any taxable year beginning after #bjah1 the dollar amounts in paragraphs 7#d77;,a7 and 7#e77;,a7 shall each be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under subsection 7c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjag for calendar year #bjaf in clause 7ii7 thereof4 ,if any increase determined under the preceding sentence is not a multiple of #ajj1 such increase shall be rounded to the next lowest multiple of #ajj4 7h7 ,regulations ,the ,secretary may issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section1 including regulations or other guidance-- 7#a7 which ensures that no amount is taken into account under subsection 7f77#d7 with respect to more than one activity1 and 7#b7 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 7a7 or 7b7 of section #eb or subsection 7m7 or 7o7 of section #dad4 7i7 ,references ,any reference in this title to section #a shall be treated as including a reference to this section unless the context of such reference clearly indicates otherwise4 4 7b7 #be percent rate for certain dividends of real estate investment trusts and cooperatives ,section #a7;h71 as amended by the preceding provisions of this ,act1 is amended by adding at the end the following new paragraph3 7#ac7 #be percent rate for certain dividends of real estate investment trusts and cooperatives 7,a7 ,in general ,for purposes of this subsection1 net capital gain 7as defined in paragraph 7#aa77 and unrecaptured section #abej gain 7as defined in paragraph 7#f77 shall each be increased by specified dividend income4 7,b7 ,specified dividend income ,for purposes of this paragraph1 the term specified dividend income means-- 7i7 in the case of any dividend received from a real estate investment trust1 the portion of such dividend which is neither-- 7,i7 a capital gain dividend 7as defined in section #heb7;b77#c771 nor 7,,ii7 taken into account in determining qualified dividend income 7as defined in paragraph 7#aa771 and 7ii7 any dividend which is includible in gross income and which is received from an organization or corporation described in section #eja7;c77#ab7 or #acha7;a74 4 7c7 ,clerical amendment ,the table of sections for part ,i of subchapter ,a of chapter #a is amended by inserting after the item relating to section #c the following new item3 ,sec4 #d4 #be percent maximum rate on business income of individuals4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7e7 ,transition rule ,in the case of any taxable year which includes ,december #ca1 #bjag1 the amendment made by subsection 7a7 shall apply with respect to such taxable year adjusted-- 7#a7 so as to apply with respect to the rates of tax in effect under section #a of the ,internal ,revenue ,code of #aihf with respect to such taxable year 7and so as to achieve a #be percent effective rate of tax on the business income 7determined without regard to paragraph 7#b77 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 years71 and 7#b7 by reducing the amount of the reduction in tax 7as otherwise determined under paragraph 7#a77 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 #a1 #bjah1 bears to the number of days in the entire taxable year4 #ajje4 ,conforming amendments related to simplification of individual income tax rates 7a7 ,amendments related to modification of inflation adjustment 7#a7 ,section #cb7;b77#b77;,b77ii77,,ii7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins determined by substituting calendar year #bjjh for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins determined by substituting calendar year #bjjh for calendar year #bjaf in clause 7ii7 thereof4 7#b7 ,section #cb7;j77#a77;,b7 is amended-- 7,a7 in the matter preceding clause 7i71 by striking section #a7;f77#c7 and inserting section #a7;c77#b77;,a71 7,b7 in clause 7i71 by striking for calendar year #aiib in subparagraph 7,b7 thereof and inserting for calendar year #bjaf in clause 7ii7 thereof1 and 7,c7 in clause 7ii71 by striking for calendar year #aiib in subparagraph 7,b7 of such section #a and inserting for calendar year #bjaf in clause 7ii7 thereof4 7#c7 ,section #cf;,b7b77#c77;,a77ii77,,ii7 is amended by striking consumer price index and inserting ,c-,,cpi-,u 7as defined in section #a7;c774 7#d7 ,section #da7;e77#e77;,c7 is amended to read as follows3 7,c7 ,cost-of-living adjustment defined 7i7 ,in general ,the cost-of-living adjustment for any calendar year is the cost-of-living adjustment for such calendar year determined under section #a7;c77#b77;,a71 by substituting calendar year #aihg for calendar year #bjaf in clause 7ii7 thereof4 7ii7 ,special rule where base period ends in a calendar year other than #aihc or #aihd ,if the base period of any taxpayer does not end in #aihc or #aihd1 clause 7i7 shall be applied by substituting the calendar year in which such base period ends for #aihg4 4 7#e7 ,section #db7;e77#c77;,d77ii7 is amended by striking section #a7;f77#c7 for such calendar year by substituting calendar year #bjjh for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year by substituting calendar year #bjjh for calendar year #bjaf in clause 7ii7 thereof4 7#f7 ,section #db7;h77#c77;,h77i77,,ii7 is amended by striking section #a7;f77#c7 for such calendar year by substituting calendar year #bjja for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year by substituting calendar year #bjja for calendar year #bjaf in clause 7ii7 thereof4 7#g7 ,section #de,r7d77#c77;,b77ii7 is amended by striking section #a7;f77#c7 for the calendar year1 determined by substituting calendar year #bjab for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjab for calendar year #bjaf in clause 7ii7 thereof4 7#h7 ,section #abe7;i77#b7 is amended-- 7,a7 by striking section #a7;f77#c7 for the calendar year in which the taxable year begins by substituting calendar year #bjab for calendar year #aiib in subparagraph 7,b7 thereof in subparagraph 7,b7 and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 and 7,b7 by striking #ej both places it appears in the last sentence and inserting #ajj4 7#i7 ,section #afb7o77#c7 is amended by inserting as in effect before enactment of the ,tax ,cuts and ,jobs ,act after section #a7;f77#e74 7#aj7 ,section #bbj7;g77#b7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins by substituting calendar year #aiig for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #aiig for calendar year #bjaf in clause 7ii7 thereof4 7#aa7 ,section #bbc7;g77#a7 is amended by striking all that follows subparagraph 7,a7 and inserting the following3 7,b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined-- 7i7 by substituting for calendar year #bjaf in clause 7ii7 thereof-- 7,i7 except as provided in clause 7ii71 calendar year #aiig1 and 7,,ii7 in the case of each dollar amount in subsection 7c77#b77;,a71 calendar year #bjjc1 and 7ii7 by substituting ,march #ca for ,august #ca in paragraphs 7#e77;,b7 and 7#f77;,b7 of section #a7;c74 ,the ,secretary shall publish the dollar amounts as adjusted under this subsection for taxable years beginning in any calendar year no later than ,june #a of the preceding calendar year4 4 7#ab7 ,section #dcj7;c77#g77;,d77vii77,,ii7 is amended by striking section #a7;f77#c7 for the calendar year1 determined by substituting calendar year #bjji for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year1 determined by substituting calendar year #bjji for calendar year #bjaf in clause 7ii7 thereof4 7#ac7 ,section #eab7;d77#b77;,b7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins1 by substituting calendar year #aiid for calendar year #aiib in subparagraph 7,b7 thereofand inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #aiid for calendar year #bjaf in clause 7ii7 thereof4 7#ad7 ,section #eac7;h77#b77;,c77ii7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins by substituting calendar year #aihg for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #aihg for calendar year #bjaf in clause 7ii7 thereof4 7#ae7 ,section #hca7;b77#b77;,d77ii7 is amended by striking section #a7;f77#c7 for such calendar year by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year by substituting calendar year #bjac for calendar year #bjaf in clause 7ii7 thereof4 7#af7 ,section #hgg;,a7a77#c77;,b77i77,,ii7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins1 by substituting calendar year #bjjg for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjjg for calendar year #bjaf in clause 7ii7 thereof4 7#ag7 ,section #iaa7;b77#b77;,d77ii77,,ii7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting #bjjd for #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjjd for calendar year #bjaf in clause 7ii7 thereof4 7#ah7 ,section #abgd;,a7d77#b7 is amended to read as follows3 7#b7 ,inflation adjustment 7,a7 ,in general ,in the case of any debt instrument arising out of a sale or exchange during any calendar year after #bjah1 each adjusted dollar amount shall be increased by an amount equal to-- 7i7 such adjusted dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjag for calendar year #bjaf in clause 7ii7 thereof4 7,b7 ,adjusted dollar amounts ,for purposes of this paragraph1 the term adjusted dollar amount means the dollar amounts in subsections 7b7 and 7c71 in each case as in effect for calendar year #bjah4 7,c7 ,rounding ,any increase under subparagraph 7,a7 shall be rounded to the nearest multiple of #ajj4 4 7#ai7 ,section #bjaj7;c77#c77;,b77ii7 is amended by striking section #a7;f77#c7 for such calendar year by substituting calendar year #bjaj for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjaj for calendar year #bjaf in clause 7ii7 thereof4 7#bj7 ,section #bjcb;,a7a77#c77;,b7 is amended by striking section #a7;f77#c7 for such calendar year by substituting calendar year #aiig for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #aiig for calendar year #bjaf in clause 7ii7 thereof4 7#ba7 ,section #bejc7;b77#b77;,b7 is amended by striking section #a7;f77#c7 for such calendar year by substituting calendar year #aiig for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year1 determined by substituting calendar year #aiig for calendar year #bjaf in clause 7ii7 thereof4 7#bb7 ,section #dafa7;b77#b77;,c77i77,,ii7 is amended by striking section #a7;f77#c7 for such calendar year1 determined by substituting #bjjd for #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjjd for calendar year #bjaf in clause 7ii7 thereof4 7#bc7 ,section #dbfa7;e77#d77;,a77ii7 is amended by striking section #a7;f77#c7 for such calendar year by substituting the year before the last nonindexed year for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting the year before the last nonindexed year for calendar year #bjaf in clause 7ii7 thereof4 7#bd7 ,section #dihj;,i7b77#c77;,c77v77,,ii7 is amended-- 7,a7 by striking section #a7;f77#c7 and inserting section #a7;c77#b77;,a71 7,b7 by striking subparagraph 7,b7 and inserting clause 7ii71 and 7,c7 by striking #aiib and inserting #bjaf4 7#be7 ,section #ejjj;,a7c77#c77;,d77ii7 is amended-- 7,a7 by striking section #a7;f77#c7 and inserting section #a7;c77#b77;,a71 7,b7 by striking subparagraph 7,b7 and inserting clause 7ii71 and 7,c7 by striking #aiib and inserting #bjaf4 7#bf7 ,section #fjci;,f7d7 is amended by striking section #a7;f77#c71 except that subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a71 except that clause 7ii7 thereof 4 7#bg7 ,section #fcbc7;i77#d77;,b7 is amended by striking section #a7;f77#c7 for the calendar year1 determined by substituting calendar year #aiif for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year1 determined by substituting calendar year #aiif for calendar year #bjaf in clause 7ii7 thereof4 7#bh7 ,section #fccd7;g77#a77;,b7 is amended by striking section #a7;f77#c7 for such calendar year1 by substituting calendar year #aiih for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #aiii for calendar year #bjaf in clause 7ii7 thereof4 7#bi7 ,section #ffja7;j77#c77;,b7 is amended by striking section #a7;f77#c7 for such calendar year by substituting calendar year #aiig for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for such calendar year by substituting calendar year #aiig for calendar year #bjaf in clause 7ii7 thereof4 7#cj7 ,section #ffea7;i77#a7 is amended by striking section #a7;f77#c7 determined by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 determined by substituting calendar year #bjac for calendar year #bjaf in clause 7ii7 thereof4 7#ca7 ,section #fgba7;f77#a7 is amended-- 7,a7 by striking section #a7;f77#c7 and inserting section #a7;c77#b77;,a71 7,b7 by striking subparagraph 7,b7 and inserting clause 7ii71 and 7,c7 by striking #aiib and inserting #bjaf4 7#cb7 ,section #fgbb7;f77#a7 is amended-- 7,a7 by striking section #a7;f77#c7 and inserting section #a7;c77#b77;,a71 7,b7 by striking subparagraph 7,b7 and inserting clause 7ii71 and 7,c7 by striking #aiib and inserting #bjaf4 7#cc7 ,section #ffeb7;c77#g77;,a7 is amended by striking section #a7;f77#c7 determined by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 determined by substituting calendar year #bjac for calendar year #bjaf in clause 7ii7 thereof 4 7#cd7 ,section #ffie7;h77#a7 is amended by striking section #a7;f77#c7 determined by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 determined by substituting calendar year #bjac for calendar year #bjaf in clause 7ii7 thereof4 7#ce7 ,section #ffih7;e77#a7 is amended by striking section #a7;f77#c7 determined by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 determined by substituting calendar year #bjac for calendar year #bjaf in clause 7ii7 thereof4 7#cf7 ,section #ffii7;e77#a7 is amended by striking section #a7;f77#c7 determined by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 determined by substituting calendar year #bjac for calendar year #bjaf in clause 7ii7 thereof4 7#cg7 ,section #gcde7;f77#b7 is amended by striking section #a7;f77#c7 for the calendar year1 determined by substituting calendar year #bjae for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year1 determined by substituting calendar year #bjae for calendar year #bjaf in clause 7ii7 thereof4 7#ch7 ,section #gdcj7;c77#a7 is amended by striking section #a7;f77#c7 for such calendar year1 by substituting calendar year #aiie for calendar year #aiib in subparagraph 7,b7 thereof in the flush text at the end and inserting section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #aiie for calendar year #bjaf in clause 7ii7 thereof4 7#ci7 ,section #ghgb7;g77#e7 is amended to read as follows3 7#e7 ,inflation adjustment 7,a7 ,in general ,in the case of any loan made during any calendar year after #bjah to which paragraph 7#a7 applies1 the adjusted dollar amount shall be increased by an amount equal to-- 7i7 such adjusted dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for such calendar year1 determined by substituting calendar year #bjag for calendar year #bjaf in clause 7ii7 thereof4 7,b7 ,adjusted dollar amount ,for purposes of this paragraph1 the term adjusted dollar amount means the dollar amount in paragraph 7#b7 as in effect for calendar year #bjah4 7,c7 ,rounding ,any increase under subparagraph 7,a7 shall be rounded to the nearest multiple of #ajj4 4 7#dj7 ,section #bai7;b77#e77;,c77i77,,ii7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjjg for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjjg for calendar year #bjaf in clause 7ii7 thereof4 7#da7 ,section #bai7;g77#h77;,b7 is amended by striking section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjje for calendar year #aiib in subparagraph 7,b7 thereof and inserting section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjje for calendar year #bjaf in clause 7ii7 thereof4 7b7 ,other conforming amendments 7#a7 ,section #cf;,b7b77#c77;,b77ii77,i77aa7 is amended to read as follows3 7aa7 who is described in section #a7;b77#a77;,b7 and who does not have any dependents for the taxable year1 4 7#b7 ,section #dhf;,b7b77#a7 is amended-- 7,a7 by striking maximum rate in effect and inserting highest rate specified1 and 7,b7 by striking section #a7;e7 and inserting section #a4 7#c7 ,section #eaa7;b77#a7 is amended by striking section #a7;e7 and inserting section #a4 7#d7 ,section #fda7;a7 is amended by striking section #a7;e7 shall apply to the taxable income and inserting section #a shall apply to the taxable income4 7#e7 ,section #fda7;c77#b77;,a7 is amended to read as follows3 7,a7 ,except to the extent provided in section #a7;h71 the rate of tax shall be treated as being the highest rate of tax set forth in section #a7;a74 4 7#f7 ,section #fdf7;b7 is amended to read as follows3 7b7 ,taxation of income of trust ,except as provided in subsection 7f77#a77;,b77ii71 there is hereby imposed on the taxable income of an electing ,settlement ,trust a tax at the rate specified in section #a7;a77#a74 ,such tax shall be in lieu of the income tax otherwise imposed by this chapter on such income4 4 7#g7 ,section #fhe7;c7 is amended by striking ,section #a7;e7 and inserting ,section #a4 7#h7 ,section #ijd7;b77#c77;,e77ii77,i7 is amended by striking set forth in subsection 7a71 7b71 7c71 7d71 or 7e7 of section #a 7whichever applies7 and inserting the highest rate of tax specified in section #a4 7#i7 ,section #acih7;c77#b7 is amended by striking subsection 7d7 of4 7#aj7 ,section #cdjb7p77#a77;,b7 is amended by striking any percentage applicable to any of the #c lowest income brackets in the table under section #a7;c71 and inserting #ab percent1 #be percent14 7#aa7 ,section #cdjb7q77#a7 is amended by striking the product of third lowest rate of tax applicable under section #a7;c7 and and inserting #be percent of4 7#ab7 ,section #cdjb7r77#c7 is amended by striking the amount of tax which would be imposed by section #a7;c7 7determined without regard to any rate of tax in excess of the fourth lowest rate of tax applicable under section #a7;c77 on an amount of taxable income equal to and inserting an amount equal to the product of #be percent multiplied by4 7#ac7 ,section #cdjf7;a77#a7 is amended by striking the product of the fourth lowest rate of tax applicable under section #a7;c7 and and inserting #be percent of 4 7#ad7 ,section #fajc7;e77#a77;,a77iii7 is amended by inserting 7as in effect on the day before the date of the enactment of the ,tax ,cuts and ,jobs ,act7 after section #a7;g74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,b ,simplification and reform of family and individual tax credits #aaja4 ,enhancement of child tax credit and new family tax credit 7a7 ,increase in credit amount and addition of other dependents 7#a7 ,in general ,section #bd7;a7 is amended to read as follows3 7a7 ,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-- 7#a7 with respect to each qualifying child of the taxpayer1 #a1fjj1 and 7#b7 for taxable years beginning before ,january #a1 #bjbc1 with respect to the taxpayer 7each spouse in the case of a joint return7 and each dependent of the taxpayer to whom paragraph 7#a7 does not apply1 #cjj4 4 7#b7 ,conforming amendments 7,a7 ,section #bd7;c7 is amended-- 7i7 by redesignating paragraphs 7#a7 and 7#b7 as paragraphs 7#b7 and 7#c71 respectively1 7ii7 by striking #aeb7;c7 in paragraph 7#b7 7as so redesignated7 and inserting #ggjf7;c71 7iii7 by inserting before paragraph 7#b7 7as so redesignated7 the following new paragraph3 7#a7 ,dependent 7,a7 ,in general ,the term dependent shall have the meaning given such term by section #ggjf4 7,b7 ,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 begins1 the amount applicable to such individual under subsection 7a7 for such individual's taxable year shall be zero4 1 7iv7 in paragraph 7#c7 7as so redesignated7-- 7,i7 by striking term qualifying child and inserting terms qualifying child and dependent1 and 7,,ii7 by striking #aeb7;b77#c7 and inserting #ggjf7;b77#c71 and 7v7 in the heading by striking ,qualifying and inserting ,dependent2 qualifying4 7,b7 ,the heading for section #bd is amended by inserting and family after ,child4 7,c7 ,the table of sections for subpart ,a of part ,,iv of subchapter ,a of chapter #a is amended by striking the item relating to section #bd and inserting the following new item3 ,sec4 #bd4 ,child and family tax credit4 4 7b7 ,elimination of marriage penalty ,section #bd7;b77#b7 is amended-- 7#a7 by striking #aaj1jjj in subparagraph 7,a7 and inserting #bcj1jjj1 7#b7 by inserting and at the end of subparagraph 7,a71 7#c7 by striking #ge1jjj 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 7,a7 for the taxable year in the case of any other individual44 7c7 ,credit refundable up to #a1jjj per child 7#a7 ,in general ,section #bd7;d77#a77;,a7 is amended by striking all that follows under this section and inserting the following3 determined-- 7i7 without regard to this subsection and the limitation under section #bf7;a71 7ii7 without regard to subsection 7a77#b71 and 7iii7 by substituting #a1jjj for #a1fjj in subsection 7a77#a71 or 4 7#b7 ,inflation adjustment ,section #bd7;d7 is amended by inserting after paragraph 7#b7 the following new paragraph3 7#c7 ,inflation adjustment ,in the case of any taxable year beginning in a calendar year after #bjag1 the #a1jjj amount in paragraph 7#a77;,a77iii7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment under section #a7;c77#b77;,a7 for such calendar year4 ,any increase determined under the preceding sentence shall be rounded to the next highest multiple of #ajj and shall not exceed the amount in effect under subsection 7a77#b74 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajb4 ,repeal of nonrefundable credits 7a7 ,repeal of section #bb 7#a7 ,in general ,subpart ,a of part ,,iv of subchapter ,a of chapter #a is amended by striking section #bb 7and by striking the item relating to such section in the table of sections for such subpart74 7#b7 ,conforming amendment 7,a7 ,section #hf7;f7 is amended by striking paragraph 7#a7 and by redesignating paragraphs 7#b71 7#c71 and 7#d7 as paragraphs 7#a71 7#b71 and 7#c71 respectively4 7,b7 7i7 ,subsections 7c77#c77;,b7 and 7d77#d77;,a7 of section #ggjf1 as redesignated by this ,act1 are each amended by striking 7as defined in section #bb7;e77#c74 7ii7 ,section #ggjf7;f71 as redesignated by this ,act1 is amended by redesignating paragraph 7#g7 as paragraph 7#h7 and by inserting after paragraph 7#f7 the following new paragraph3 7#g7 ,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 #ab months4 ,an individual shall not be considered to be permanently and totally disabled unless he furnishes proof of the existence thereof in such form and manner1 and at such times1 as the ,secretary may require4 4 7iii7 ,section #dae7;c77#c77;,c77i7 is amended by striking #bb7;e77#c7 and inserting #ggjf7;f77#g74 7iv7 ,section #dbb7;c77#f7 is amended by striking #bb7;e77#c7 and inserting #ggjf7;f77#g74 7b7 ,termination of section #be ,section #be1 as amended by section #cfja1 is amended by adding at the end the following new subsection3 7k7 ,termination ,no credit shall be allowed under this section with respect to any mortgage credit certificate issued after ,december #ca1 #bjag4 4 7c7 ,repeal of section #cj;,d 7#a7 ,in general ,subpart ,b of part ,,iv of subchapter ,a of chapter #a is amended by striking section #cj;,d 7and by striking the item relating to such section in the table of sections for such subpart74 7#b7 ,conforming amendments 7,a7 ,section #ch7;b7 is amended by striking paragraph 7#ce74 7,b7 ,section #ajaf7;a7 is amended by striking paragraph 7#cg74 7,c7 ,section #feja7m7 is amended by striking #cj;,d7e77#d714 7d7 ,effective date 7#a7 ,in general ,except as provided in paragraphs 7#b7 and 7#c71 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7#b7 ,subsection 7b7 ,the amendment made by subsection 7c7 shall apply to taxable years ending after ,december #ca1 #bjag4 7#c7 ,subsection 7c7 ,the amendments made by subsection 7d7 shall apply to vehicles placed in service in taxable years beginning after ,december #ca1 #bjag4 #aajc4 ,refundable credit program integrity 7a7 ,identification requirements for child and family tax credit 7#a7 ,in general ,section #bd7;e7 is amended to read as follows3 7e7 ,identification requirements 7#a7 ,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 year4 ,the preceding sentence shall not prevent a qualifying child from being treated as a dependent described in subsection 7a77#b74 7#b7 ,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 year4 7#c7 ,social security number ,for purposes of this subsection1 the term social security number means a social security number issued by the ,social ,security ,administration 7but only if the social security number is issued to a citizen of the ,united ,states or pursuant to subclause 7,i7 7or that portion of subclause 7,,iii7 that relates to subclause 7,i77 of section #bje7;c77#b77;,b77i7 of the ,social ,security ,act774 4 7#b7 ,omissions treated as mathematical or clerical error 7,a7 ,in general ,section #fbac7;g77#b77;,i7 is amended to read as follows3 7,i7 an omission of a correct social security number1 or a correct ,,tin1 required under section #bd7;e7 7relating to child tax credit71 to be included on a return1 4 7b7 ,social security number must be provided 7#a7 ,in general ,section #be;,a7f77#a77;,a71 as amended by section #abja of this ,act1 is amended by striking taxpayer identification number each place it appears and inserting social security number4 7#b7 ,omission treated as mathematical or clerical error ,section #fbac7;g77#b77;,j7 is amended by striking ,,tin and inserting social security number and employer identification number4 7c7 ,individuals prohibited from engaging in employment in ,united ,states not eligible for earned income tax credit ,section #cb7m7 is amended-- 7#a7 by striking 7other than3 and all that follows through of the ,social ,security ,act71 and 7#b7 by inserting before the period at the end the following3 1 but only if1 in the case of subsection 7c77#a77;,e71 the social security number is issued to a citizen of the ,united ,states or pursuant to subclause 7,i7 7or that portion of subclause 7,,iii7 that relates to subclause 7,i77 of section #bje7;c77#b77;,b77i7 of the ,social ,security ,act4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajd4 ,procedures to reduce improper claims of earned income credit 7a7 ,clarification regarding determination of self-employment income which is treated as earned income ,section #cb7;c77#b77;,b7 is amended by striking and at the end of clause 7v71 by striking the period at the end of clause 7vi7 and inserting 1 and1 and by adding at the end the following new clause3 7vii7 in determining the taxpayer's net earnings from self-employment under subparagraph 7,a77ii7 there shall not fail to be taken into account any deduction which is allowable to the taxpayer under this subtitle4 4 7b7 ,required quarterly reporting of wages of employees ,section #fjaa is amended by adding at the end the following new subsection3 7i7 ,employer reporting of wages ,every person required to deduct and withhold from an employee a tax under section #caja or #cdjb shall include on each return or statement submitted with respect to such tax1 the name and address of such employee and the amount of wages for such employee on which such tax was withheld4 4 7c7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to taxable years ending after the date of the enactment of this ,act4 7#b7 ,reporting ,the ,secretary of the ,treasury1 or his designee1 may delay the application of the amendment made by subsection 7b7 for such period as such ,secretary 7or designee7 determines to be reasonable to allow persons adequate time to modify electronic 7or other7 systems to permit such person to comply with the requirements of such amendment4 #aaje4 ,certain income disallowed for purposes of the earned income tax credit 7a7 ,substantiation requirement ,section #cb is amended by adding at the end the following new subsection3 7n7 ,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 #fjea1 #fjeb1 #fjda7;a71 or #fjej,w with respect to such taxpayer1 the ,secretary may require such taxpayer to provide books and records to substantiate such income1 including for the purpose of preventing fraud4 4 7b7 ,exclusion of unsubstantiated amount from earned income ,section #cb7;c77#b7 is amended by adding at the end the following new subparagraph3 7,c7 ,exclusion ,in the case of a taxpayer with respect to which there is an inconsistency described in subsection 7n7 who fails to substantiate such inconsistency to the satisfaction of the ,secretary1 the term earned income shall not include amounts to the extent of such inconsistency4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years ending after the date of the enactment of this ,act4 ,c ,simplification and reform of education incentives #abja4 ,american opportunity tax credit 7a7 ,in general ,section #be;,a is amended to read as follows3 #be;,a4 ,american opportunity tax credit 7a7 ,in general ,in the case of an individual1 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-- 7#a7 #ajj percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year 7for 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 year7 as does not exceed #b1jjj1 plus 7#b7 #be percent of so much of such expenses so paid as exceeds the dollar amount in effect under paragraph 7#a7 but does not exceed twice such dollar amount4 7b7 ,portion of credit refundable #dj percent of the credit allowable under subsection 7a77#a7 7determined without regard to this subsection and section #bf7;a7 and after application of all other provisions of this section7 shall be treated as a credit allowable under subpart ,c 7and not under this part74 ,the preceding sentence shall not apply to any taxpayer for any taxable year if such taxpayer is a child to whom section #a7;d7 applies for such taxable year4 7c7 ,limitation based on modified adjusted gross income 7#a7 ,in general ,the amount allowable as a credit under subsection 7a7 for any taxable year shall be reduced 7but not below zero7 by an amount which bears the same ratio to the amount so allowable 7determined without regard to this subsection and subsection 7b7 but after application of all other provisions of this section7 as-- 7,a7 the excess of-- 7i7 the taxpayer's modified adjusted gross income for such taxable year1 over 7ii7 #hj1jjj 7twice such amount in the case of a joint return71 bears to 7,b7 #aj1jjj 7twice such amount in the case of a joint return74 7#b7 ,modified adjusted gross income ,for purposes of this subsection1 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 #iaa1 #ica1 or #icc4 7d7 ,other limitations 7#a7 ,credit allowed only for #e taxable years ,an election to have this section apply may not be made for any taxable year if such an election 7by the taxpayer or any other individual7 is in effect with respect to such student for any #e prior taxable years4 7#b7 ,credit allowed only for first #e years of postsecondary education 7,a7 ,in general ,no credit shall be allowed under subsection 7a7 for a taxable year with respect to the qualified tuition and related expenses of an eligible student if the student has completed 7before the beginning of such taxable year7 the first #e years of postsecondary education at an eligible educational institution4 7,b7 ,fifth year limitations ,in the case of an eligible student with respect to whom an election has been in effect for #d preceding taxable years for purposes of the fifth taxable year-- 7i7 the amount of the credit allowed under this section for the taxable year shall not exceed an amount equal to #ej percent of the credit otherwise determined with respect to such student under this section 7without regard to this subparagraph71 and 7ii7 the amount of the credit determined under subsection 7b7 and allowable under subpart ,c shall not exceed an amount equal to #dj percent of the amount determined with respect to such student under clause 7i74 7e7 ,definitions ,for purposes of this section-- 7#a7 ,eligible student ,the term eligible student means1 with respect to any academic period1 a student who-- 7,a7 meets the requirements of section #dhd7;a77#a7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajia7;a77#a771 as in effect on ,august #e1 #aiig1 and 7,b7 is carrying at least the normal full-time work load for the course of study the student is pursuing4 7#b7 ,qualified tuition and related expenses 7,a7 ,in general ,the term qualified tuition and related expenses means tuition1 fees1 and course materials1 required for enrollment or attendance of-- 7i7 the taxpayer1 7ii7 the taxpayer's spouse1 or 7iii7 any dependent of the taxpayer1 at an eligible educational institution for courses of instruction of such individual at such institution4 7,b7 ,exception for education involving sports1 etc ,such term does not include expenses with respect to any course or other education involving sports1 games1 or hobbies1 unless such course or other education is part of the individual's degree program4 7,c7 ,exception for nonacademic fees ,such term does not include student activity fees1 athletic fees1 insurance expenses1 or other expenses unrelated to an individual's academic course of instruction4 7#c7 ,eligible educational institution ,the term eligible educational institution means an institution-- 7,a7 which is described in section #dha of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajhh71 as in effect on ,august #e1 #aiig1 and 7,b7 which is eligible to participate in a program under title ,,iv of such ,act4 7f7 ,special rules 7#a7 ,identification requirements 7,a7 ,student ,no credit shall be allowed under subsection 7a7 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 year1 and such taxpayer identification number was issued on or before the due date for filing such return4 7,b7 ,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 year4 7,c7 ,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 individual4 7#b7 ,adjustment for certain scholarships1 etc ,the amount of qualified tuition and related expenses otherwise taken into account under subsection 7a7 with respect to an individual for an academic period shall be reduced 7before the application of subsection 7c77 by the sum of any amounts paid for the benefit of such individual which are allocable to such period as-- 7,a7 a qualified scholarship which is excludable from gross income under section #aag1 7,b7 an educational assistance allowance under chapter #cj1 #ca1 #cb1 #cd1 or #ce of title #ch1 ,united ,states ,code1 or under chapter #afjf of title #aj1 ,united ,states ,code1 and 7,c7 a payment 7other than a gift1 bequest1 devise1 or inheritance within the meaning of section #ajb7;a77 for such individual's educational expenses1 or attributable to such individual's enrollment at an eligible educational institution1 which is excludable from gross income under any law of the ,united ,states4 7#c7 ,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-- 7,a7 no credit shall be allowed under subsection 7a7 to such individual for such individual's taxable year1 and 7,b7 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 taxpayer4 7#d7 ,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 #c months following such taxable year1 such academic period shall be treated for purposes of this section as beginning during such taxable year4 7#e7 ,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 chapter4 7#f7 ,no credit for married individuals filing separate returns ,if the taxpayer is a married individual 7within the meaning of section #ggjc71 this section shall apply only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year4 7#g7 ,nonresident aliens ,if the taxpayer is a nonresident alien individual for any portion of the taxable year1 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 7g7 or 7h7 of section #fjac4 7#h7 ,restrictions on taxpayers who improperly claimed credit in prior year 7,a7 ,taxpayers making prior fraudulent or reckless claims 7i7 ,in general ,no credit shall be allowed under this section for any taxable year in the disallowance period4 7ii7 ,disallowance period ,for purposes of clause 7i71 the disallowance period is-- 7,i7 the period of #aj 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 fraud1 and 7,,ii7 the period of #b 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 7but not due to fraud74 7,b7 ,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 #fc1 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 credit4 7g7 ,inflation adjustment 7#a7 ,in general ,in the case of a taxable year beginning after #bjah1 the #hj1jjj amount in subsection 7c77#a77;,a77ii7 shall each be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjag for calendar year #bjaf in clause 7ii7 thereof4 7#b7 ,rounding ,if any amount as adjusted under paragraph 7#a7 is not a multiple of #a1jjj1 such amount shall be rounded to the next lowest multiple of #a1jjj4 7h7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out this section1 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 credit4 4 7b7 ,conforming amendments 7#a7 ,section #gb7t77#g77;,b7 is amended by striking section #be;,a7g77#b7 and inserting section #be;,a7f77#b74 7#b7 ,section #ebi7;c77#c77;,b77v77,i7 is amended by striking section #be;,a7g77#b7 and inserting section #be;,a7f77#b74 7#c7 ,section #ebi7;e77#c77;,b77i7 is amended by striking section #be;,a7b77#c7 and inserting section #be;,a7d74 7#d7 ,section #ecj7;d77#b77;,c7 is amended-- 7,a7 by striking section #be;,a7g77#b7 in clause 7i77,i7 and inserting section #be;,a7f77#b71 and 7,b7 by striking ,hope and ,lifetime ,learning credits in the heading and inserting ,american opportunity tax credit4 7#e7 ,section #ecj7;d77#d77;,b77iii7 is amended by striking section #be;,a7g77#b7 and inserting section #be;,a7d77#d77;,b74 7#f7 ,section #fjej,s7e7 is amended by striking subsection 7g77#b7 and inserting subsection 7f77#b74 7#g7 ,section #fbaa7;b77#d77;,a7 is amended by striking subsection 7i77#f7 and inserting subsection 7b74 7#h7 ,section #fbac7;g77#b77;,j7 is amended by striking ,,tin required under section #be;,a7g77#a7 and inserting ,,tin1 and employer identification number1 required under section #be;,a7f77#a74 7#i7 ,section #fbac7;g77#b77,q7 is amended to read as follows3 7,q7 an omission of information required by section #be;,a7f77#h77;,b7 or an entry on the return claiming the credit determined under section #be;,a7a7 for a taxable year for which the credit is disallowed under section #be;,a7f77#h77;,a74 4 7#aj7 ,section #ajjd7;c7 of division ,b of the ,american ,recovery and ,reinvestment ,tax ,act of #bjji is amended-- 7,a7 in paragraph 7#a7-- 7i7 by striking section #be;,a7i77#f7 each place it appears and inserting section #be;,a7b71 and 7ii7 by striking with respect to taxable years beginning after #bjjh and before #bjah each place it appears and inserting with respect to each taxable year1 7,b7 in paragraph 7#b71 by striking ,section #be;,a7i77#f7 and inserting ,section #be;,a7b71 and 7,c7 in paragraph 7#c77;,c71 by striking subsection 7i77#f7 and inserting subsection 7b74 7#aa7 ,the table of sections for subpart ,a of part ,,iv of subchapter ,a of chapter #a is amended by striking the item relating to section #be;,a and inserting the following new item3 ,sec4 #be;,a4 ,american opportunity tax credit4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #abjb4 ,consolidation of education savings rules 7a7 ,no new contributions to ,coverdell education savings account ,section #ecj7;b77#a77;,a7 is amended to read as follows3 7,a7 ,except in the case of rollover contributions1 no contribution will be accepted after ,december #ca1 #bjag4 4 7b7 ,limited distribution allowed for elementary and secondary tuition 7#a7 ,in general ,section #ebi7;c7 is amended by adding at the end the following new paragraph3 7#g7 ,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 school4 4 7#b7 ,limitation ,section #ebi7;e77#c77;,a7 is amended by adding at the end the following3 ,the amount of cash distributions from all qualified tuition programs described in subsection 7b77#a77;,a77ii7 with respect to a beneficiary during any taxable year1 shall1 in the aggregate1 include not more than #aj1jjj 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 public1 private1 or religious school44 7c7 ,rollovers to qualified tuition programs permitted ,section #ecj7;d77#e7 is amended by inserting 1 or into 7by purchase or contribution7 a qualified tuition program 7as defined in section #ebi71 after into another ,coverdell education savings account4 7d7 ,distributions from qualified tuition programs for certain expenses associated with registered apprenticeship programs ,section #ebi7;e77#c7 is amended by adding at the end the following new subparagraph3 7,c7 ,certain expenses associated with registered apprenticeship programs ,the term qualified higher education expenses shall include books1 supplies1 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 #a of the ,national ,apprenticeship ,act 7#bi ,u4,s4,c4 #ej74 4 7e7 ,unborn children allowed as account beneficiaries ,section #ebi7;e7 is amended by adding at the end the following new paragraph3 7#f7 ,treatment of unborn children 7,a7 ,in general ,nothing shall prevent an unborn child from being treated as a designated beneficiary or an individual under this section4 7,b7 ,unborn child ,for purposes of this paragraph-- 7i7 ,in general ,the term unborn child means a child in utero4 7ii7 ,child in utero ,the term child in utero means a member of the species homo sapiens1 at any stage of development1 who is carried in the womb4 4 7f7 ,effective dates 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to contributions made after ,december #ca1 #bjag4 7#b7 ,rollovers to qualified tuition programs ,the amendments made by subsection 7b7 shall apply to distributions after ,december #ca1 #bjag4 #abjc4 ,reforms to discharge of certain student loan indebtedness 7a7 ,treatment of student loans discharged on account of death or disability ,section #ajh7;f7 is amended by adding at the end the following new paragraph3 7#e7 ,discharges on account of death or disability 7,a7 ,in general ,in the case of an individual1 gross income does not include any amount which 7but for this subsection7 would be includible in gross income by reasons of the discharge 7in whole or in part7 of any loan described in subparagraph 7,b7 if such discharge was-- 7i7 pursuant to subsection 7a7 or 7d7 of section #dcg of the ,higher ,education ,act of #aife or the parallel benefit under part ,d of title ,,iv of such ,act 7relating to the repayment of loan liability71 7ii7 pursuant to section #dfd7;c77#a77;,f7 of such ,act1 or 7iii7 otherwise discharged on account of the death or total and permanent disability of the student4 7,b7 ,loans described ,a loan is described in this subparagraph if such loan is-- 7i7 a student loan 7as defined in paragraph 7#b771 or 7ii7 a private education loan 7as defined in section #adj7g7 of the ,consumer ,credit ,protection ,act 7#ae ,u4,s4,c4 #afej7g7774 4 7b7 ,exclusion from gross income for payments made under indian health service loan repayment program 7#a7 ,in general ,section #ajh7;f77#d7 is amended by inserting under section #ajh of the ,indian ,health ,care ,improvement ,act1 after #cch;,i of such ,act14 7#b7 ,clerical amendment ,the heading for section #ajh7;f77#d7 is amended by striking and certain and inserting 1 indian health service loan repayment program1 and certain4 7c7 ,effective dates 7#a7 ,subsection 7a7 ,the amendment made by subsection 7a77#a7 shall apply to discharges of indebtedness after ,december #ca1 #bjag4 7#b7 ,subsection 7b7 ,the amendments made by subsection 7b7 shall apply to amounts received in taxable years beginning after ,december #ca1 #bjag4 #abjd4 ,repeal of other provisions relating to education 7a7 ,in general ,subchapter ,b of chapter #a is amended-- 7#a7 in part ,,vii by striking sections #bba and #bbb 7and by striking the items relating to such sections in the table of sections for such part71 7#b7 in part ,,vii by striking sections #ace and #abg 7and by striking the items relating to such sections in the table of sections for such part71 and 7#c7 by striking subsection 7d7 of section #aag4 7b7 ,conforming amendment relating to section #bba 7#a7 ,section #fb7;a7 is amended by striking paragraph 7#ag74 7#b7 ,section #gd7;d7 is amended by striking #bba14 7#c7 ,section #hf7;b77#b77;,a7 is amended by striking #bba14 7#d7 ,section #bai7;g77#c77;,a77ii7 is amended by striking #bba14 7#e7 ,section #afc7;h77#b7 is amended by striking subparagraph 7,f74 7#f7 ,section #fjej,s7a7 is amended-- 7,a7 by inserting or at the end of paragraph 7#a71 7,b7 by striking or at the end of paragraph 7#b71 and 7,c7 by striking paragraph 7#c74 7#g7 ,section #fjej,s7e7 is amended by striking all that follows thereof7 and inserting a period4 7c7 ,conforming amendments related to section #bbb 7#a7 ,section #fb7;a7 is amended by striking paragraph 7#ah74 7#b7 ,section #gd7;d77#b77;,b7 is amended by striking #bbb14 7#c7 ,section #hf7;b77#b77;,a7 is amended by striking #bbb14 7#d7 ,section #bai7;g77#c77;,a77ii7 is amended by striking #bbb14 7d7 ,conforming amendments relating to section #abg 7#a7 ,section #abe7;f77#a7 is amended by striking #abg14 7#b7 ,section #acb7;j77#h7 is amended by striking which are not excludable from gross income under section #abg4 7#c7 ,section #dad7n77#c77;,c7 is amended by striking #abg14 7#d7 ,section #dad7t77#b7 is amended by striking #abg14 7#e7 ,section #caba7;a77#ah7 is amended by striking #abg14 7#f7 ,section #cbca7;e7 is amended by striking paragraph 7#f74 7#g7 ,section #ccjf7;b77#ac7 is amended by #abg14 7#h7 ,section #cdja7;a77#ah7 is amended by striking #abg14 7#i7 ,section #fjci;,d7d77#a7 is amended by striking 1 #abg4 7e7 ,conforming amendments relating to section #aag7;d7 7#a7 ,section #aag7;c77#a7 is amended-- 7,a7 by striking subsections 7a7 and 7d7 and inserting subsection 7a71 and 7,b7 by striking or qualified tuition reduction4 7#b7 ,section #dad7n77#c77;,c7 is amended by striking #aag7;d714 7#c7 ,section #dad7t77#b7 is amended by striking #aag7;d714 7f7 ,conforming amendments related to section #ace 7#a7 ,section #gd7;d77#b77;,b7 is amended by striking #ace14 7#b7 ,section #hf7;b77#b77;,a7 is amended by striking #ace14 7#c7 ,section #bai7;g77#c77;,a77ii7 is amended by striking #ace14 7g7 ,effective dates 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7#b7 ,amendments relating to section #aag7;d7 ,the amendments made by subsections 7a77#c7 and 7e7 shall apply to amounts paid or incurred after ,december #ca1 #bjag4 #abje4 ,rollovers between qualified tuition programs and qualified ,,able programs 7a7 ,rollovers from qualified tuition programs to qualified ,,able programs ,section #ebi7;c77#c77;,c77i7 is amended by striking or at the end of subclause 7,i71 by striking the period at the end of subclause 7,,ii7 and inserting 1 or1 and by adding at the end the following new subclause3 7,,iii7 to an ,,able account 7as defined in section #ebi;,a7e77#f77 of the designated beneficiary or a member of the family of the designated beneficiary4 ,subclause 7,,iii7 shall not apply to so much of a distribution which1 when added to all other contributions made to the ,,able account for the taxable year1 exceeds the limitation under section #ebi;,a7b77#b77;,b74 4 7b7 ,effective date ,the amendments made by this section shall apply to distributions after ,december #ca1 #bjag4 ,d ,simplification and reform of deductions #acja4 ,repeal of overall limitation on itemized deductions 7a7 ,in general ,part #a of subchapter ,b of chapter #a is amended by striking section #fh 7and the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acjb4 ,mortgage interest 7a7 ,modification of limitations 7#a7 ,in general ,section #afc7;h77#c7 is amended to read as follows3 7#c7 ,qualified residence interest ,for purposes of this subsection-- 7,a7 ,in general ,the term qualified residence interest means any interest which is paid or accrued during the taxable year on indebtedness which-- 7i7 is incurred in acquiring1 constructing1 or substantially improving any qualified residence 7determined as of the time the interest is accrued7 of the taxpayer1 and 7ii7 is secured by such residence4 ,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 7or this sentence72 but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness4 7,b7 ,limitation ,the aggregate amount of indebtedness taken into account under subparagraph 7,a7 for any period shall not exceed #ejj1jjj 7half of such amount in the case of a married individual filing a separate return74 7,c7 ,treatment of indebtedness incurred on or before ,november #b1 #bjag 7i7 ,in general ,in the case of any pre-,november #b1 #bjag1 indebtedness1 this paragraph shall apply as in effect immediately before the enactment of the ,tax ,cuts and ,jobs ,act4 7ii7 ,pre-,november #b1 #bjag1 indebtedness ,for purposes of this subparagraph1 the term pre-,november #b1 #bjag1 indebtedness means-- 7,i7 any principal residence acquisition indebtedness which was incurred on or before ,november #b1 #bjag1 or 7,,ii7 any principal residence acquisition indebtedness which is incurred after ,november #b1 #bjag1 to refinance indebtedness described in clause 7i7 7or refinanced indebtedness meeting the requirements of this clause7 to the extent 7immediately after the refinancing7 the principal amount of the indebtedness resulting from the refinancing does not exceed the principal amount of the refinanced indebtedness 7immediately before the refinancing74 7iii7 ,limitation on period of refinancing clause 7ii77,,ii7 shall not apply to any indebtedness after-- 7,i7 the expiration of the term of the original indebtedness1 or 7,,ii7 if the principal of such original indebtedness is not amortized over its term1 the expiration of the term of the #ast refinancing of such indebtedness 7or if earlier1 the date which is #cj years after the date of such #ast refinancing74 7iv7 ,binding contract exception ,in the case of a taxpayer who enters into a written binding contract before ,november #b1 #bjag1 to close on the purchase of a principal residence before ,january #a1 #bjah1 and who purchases such residence before ,april #a1 #bjah1 subparagraphs 7,a7 and 7,b7 shall be applied by substituting ,april #a1 #bjah for ,november #b1 #bjag4 4 7#b7 ,conforming amendments 7,a7 ,section #ajh7;h77#b7 is by striking for #a1jjj1jjj 7#ejj1jjj in clause 7ii7 thereof and inserting for #ejj1jjj 7#bej1jjj in paragraph 7#b77;,a71 and #a1jjj1jjj for #ejj1jjj in paragraph 7#b77;,b71 thereof4 7,b7 ,section #afc7;h7 is amended by striking subparagraphs 7,e7 and 7,f7 in paragraph 7#d74 7b7 ,taxpayers limited to #a qualified residence ,section #afc7;h77#d77;,a77i7 is amended to read as follows3 7i7 ,in general ,the term qualified residence means the principal residence 7within the meaning of section #aba7 of the taxpayer4 4 7c7 ,effective dates 7#a7 ,in general ,the amendments made by this section shall apply to interest paid or accrued in taxable years beginning after ,december #ca1 #bjag1 with respect to indebtedness incurred before1 on1 or after such date4 7#b7 ,treatment of grandfathered indebtedness ,for application of the amendments made by this section to grandfathered indebtedness1 see paragraph 7#c77;,c7 of section #afc7;h7 of the ,internal ,revenue ,code of #aihf1 as amended by this section4 #acjc4 ,repeal of deduction for certain taxes not paid or accrued in a trade or business 7a7 ,in general ,section #afd7;b77#e7 is amended to read as follows3 7#e7 ,limitation in case of individuals ,in the case of a taxpayer other than a corporation-- 7,a7 foreign real property taxes 7other than taxes which are paid or accrued in carrying on a trade or business or an activity described in section #bab7 shall not be taken into account under subsection 7a77#a71 7,b7 the aggregate amount of taxes 7other than taxes which are paid or accrued in carrying on a trade or business or an activity described in section #bab7 taken into account under subsection 7a77#a7 for any taxable year shall not exceed #aj1jjj 7#e1jjj in the case of a married individual filing a separate return71 7,c7 subsection 7a77#b7 shall only apply to taxes which are paid or accrued in carrying on a trade or business or an activity described in section #bab1 and 7,d7 subsection 7a77#c7 shall not apply to ,state and local taxes4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acjd4 ,repeal of deduction for personal casualty losses 7a7 ,in general ,section #afe7;c7 is amended by inserting and at the end of paragraph 7#a71 by striking 2 and at the end of paragraph 7#b7 and inserting a period1 and by striking paragraph 7#c74 7b7 ,conforming amendments 7#a7 ,section #afe7;h7 is amended to read as follows3 7h7 ,special rule where personal casualty gains exceed personal casualty losses 7#a7 ,in general ,if the personal casualty gains for any taxable year exceed the personal casualty losses for such taxable year-- 7,a7 all such gains shall be treated as gains from sales or exchanges of capital assets1 and 7,b7 all such losses shall be treated as losses from sales or exchanges of capital assets4 7#b7 ,definitions of personal casualty gain and personal casualty loss ,for purposes of this subsection-- 7,a7 ,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 profit1 if such loss arises from fire1 storm1 shipwreck1 or other casualty1 or from theft4 7,b7 ,personal casualty gain ,the term personal casualty gain means the recognized gain from any involuntary conversion of property which is described in subparagraph 7,a7 arising from fire1 storm1 shipwreck1 or other casualty1 or from theft4 4 7#b7 ,section #afe is amended by striking subsection 7k74 7#c7 7,a7 ,section #afe7l77#a7 is amended by striking a loss described in subsection 7c77#c7 and inserting an ordinary loss described in subsection 7c77#b74 7,b7 ,section #afe7l7 is amended-- 7i7 by striking paragraph 7#e71 7ii7 by redesignating paragraphs 7#b71 7#c71 and 7#d7 as paragraphs 7#c71 7#d71 and 7#e71 respectively1 and 7iii7 by inserting after paragraph 7#a7 the following new paragraph3 7#b7 ,limitations 7,a7 ,deposit may not be federally insured ,no election may be made under paragraph 7#a7 with respect to any loss on a deposit in a qualified financial institution if part or all of such deposit is insured under ,federal law4 7,b7 ,dollar limitation ,with respect to each financial institution1 the aggregate amount of losses attributable to deposits in such financial institution to which an election under paragraph 7#a7 may be made by the taxpayer for any taxable year shall not exceed #bj1jjj 7#aj1jjj in the case of a separate return by a married individual74 ,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 institution4 4 7#d7 ,section #agb7;b77#a77;,e77ii71 prior to amendment under title ,,iii1 is amended by striking subclause 7,i7 and by redesignating subclauses 7,,ii7 and 7,,iii7 as subclauses 7,i7 and 7,,ii71 respectively4 7#e7 ,section #agb7;d77#d77;,c7 is amended by striking paragraph 7#b7 or 7#c7 of section #afe7;c7 and inserting section #afe7;c77#b74 7#f7 ,section #bgd7;f7 is amended by striking casualty losses1 in the heading thereof4 7#g7 ,section #bhj;,a7b7 is amended by striking casualty losses1 in the heading thereof4 7#h7 ,section #hgc7;b71 as amended by the preceding provisions of this ,act1 is amended by striking paragraph 7#a7 and by redesignating paragraphs 7#b7 and 7#c7 as paragraphs 7#a7 and 7#b71 respectively4 7#i7 ,section #ejd7;b7 of the ,disaster ,tax ,relief and ,airport and ,airway ,extension ,act of #bjag is amended by adding at the end the following new paragraph3 7#d7 ,coordination with ,tax ,reform ,this subsection shall be applied without regard to the amendments made by section #acjd of the ,tax ,cuts and ,jobs ,act4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acje4 ,limitation on wagering losses 7a7 ,in general ,section #afe7;d7 is amended by adding at the end the following3 ,for purposes of the preceding sentence1 the term losses from wagering transactions includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction44 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acjf4 ,charitable contributions 7a7 ,increased limitation for cash contributions ,section #agj7;b77#a7 is amended by redesignating subparagraph 7,g7 as subparagraph 7,h7 and by inserting after subparagraph 7,f7 the following new subparagraph3 7,g7 ,increased limitation for cash contributions 7i7 ,in general ,in the case of any contribution of cash to an organization described in subparagraph 7,a71 the total amount of such contributions which may be taken into account under subsection 7a7 for any taxable year shall not exceed #fj percent of the taxpayer's contribution base for such year4 7ii7 ,carryover ,if the aggregate amount of contributions described in clause 7i7 exceeds the applicable limitation under clause 7i71 such excess shall be treated 7in a manner consistent with the rules of subsection 7d77#a77 as a charitable contribution to which clause 7i7 applies in each of the #e succeeding years in order of time4 7iii7 ,coordination with subparagraphs 7,a7 and 7,b7 7,i7 ,in general ,contributions taken into account under this subparagraph shall not be taken into account under subparagraph 7,a74 7,,ii7 ,limitation reduction ,subparagraphs 7,a7 and 7,b7 shall be applied by reducing 7but not below zero7 the aggregate contribution limitation allowed for the taxable year under each such subparagraph by the aggregate contributions allowed under this subparagraph for such taxable year4 4 7b7 ,denial of deduction for college athletic event seating rights ,section #agj7l77#a7 is amended to read as follows3 7#a7 ,in general ,no deduction shall be allowed under this section for any amount described in paragraph 7#b74 4 7c7 ,charitable mileage rate adjusted for inflation ,section #agj7;i7 is amended by striking shall be #ad cents per mile and inserting shall be a rate which takes into account the variable cost of operating an automobile4 7d7 ,repeal of substantiation exception in case of contributions reported by donee ,section #agj7;f77#h7 is amended by striking subparagraph 7,d7 and by redesignating subparagraph 7,e7 as subparagraph 7,d74 7e7 ,effective date ,the amendments made by this section shall apply to contributions made in taxable years beginning after ,december #ca1 #bjag4 #acjg4 ,repeal of deduction for tax preparation expenses 7a7 ,in general ,section #bab is amended by adding or at the end of paragraph 7#a71 by striking 2 or at the end of paragraph 7#b7 and inserting a period1 and by striking paragraph 7#c74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acjh4 ,repeal of medical expense deduction 7a7 ,in general ,part ,,vii of subchapter ,b is amended by striking by striking section #bac 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 7,a7 ,section #aje7;f7 is amended to read as follows3 7f7 ,medical care ,for purposes of this section-- 7#a7 ,in general ,the term medical care means amounts paid-- 7,a7 for the diagnosis1 cure1 mitigation1 treatment1 or prevention of disease1 or for the purpose of affecting any structure or function of the body1 7,b7 for transportation primarily for and essential to medical care referred to in subparagraph 7,a71 7,c7 for qualified long-term care services 7as defined in section #ggjb;,b7c771 or 7,d7 for insurance 7including amounts paid as premiums under part ,b of title ,,xviii of the ,social ,security ,act1 relating to supplementary medical insurance for the aged7 covering medical care referred to in subparagraphs 7,a7 and 7,b7 or for any qualified long-term care insurance contract 7as defined in section #ggjb;,b7b774 ,in the case of a qualified long-term care insurance contract 7as defined in section #ggjb;,b7b771 only eligible long-term care premiums 7as defined in paragraph 7#g77 shall be taken into account under subparagraph 7,d74 7#b7 ,amounts paid for certain lodging away from home treated as paid for medical care ,amounts paid for lodging 7not lavish or extravagant under the circumstances7 while away from home primarily for and essential to medical care referred to in paragraph 7#a77;,a7 shall be treated as amounts paid for medical care if-- 7,a7 the medical care referred to in paragraph 7#a77;,a7 is provided by a physician in a licensed hospital 7or in a medical care facility which is related to1 or the equivalent of1 a licensed hospital71 and 7,b7 there is no significant element of personal pleasure1 recreation1 or vacation in the travel away from home4 ,the amount taken into account under the preceding sentence shall not exceed #ej for each night for each individual4 7#c7 ,physician ,the term physician has the meaning given to such term by section #ahfa7r7 of the ,social ,security ,act 7#db ,u4,s4,c4 #aciex7r774 7#d7 ,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 7,a71 7,b7 and 7,c7 of paragraph 7#a7-- 7,a7 no amount shall be treated as paid for insurance to which paragraph 7#a77;,d7 applies unless the charge for such insurance is either separately stated in the contract1 or furnished to the policyholder by the insurance company in a separate statement1 7,b7 the amount taken into account as the amount paid for such insurance shall not exceed such charge1 and 7,c7 no amount shall be treated as paid for such insurance if the amount specified in the contract 7or furnished to the policyholder by the insurance company in a separate statement7 as the charge for such insurance is unreasonably large in relation to the total charges under the contract4 7#e7 ,certain pre-paid contracts ,subject to the limitations of paragraph 7#d71 premiums paid during the taxable year by a taxpayer before he attains the age of #fe for insurance covering medical care 7within the meaning of subparagraphs 7,a71 7,b71 and 7,c7 of paragraph 7#a77 for the taxpayer1 his spouse1 or a dependent after the taxpayer attains the age of #fe shall be treated as expenses paid during the taxable year for insurance which constitutes medical care if premiums for such insurance are payable 7on a level payment basis7 under the contract for a period of #aj years or more or until the year in which the taxpayer attains the age of #fe 7but in no case for a period of less than #e years74 7#f7 ,cosmetic surgery 7,a7 ,in general ,the term medical care does not include cosmetic surgery or other similar procedures1 unless the surgery or procedure is necessary to ameliorate a deformity arising from1 or directly related to1 a congenital abnormality1 a personal injury resulting from an accident or trauma1 or disfiguring disease4 7,b7 ,cosmetic surgery defined ,for purposes of this paragraph1 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 disease4 7#g7 ,eligible long-term care premiums 7,a7 ,in general ,for purposes of this section1 the term eligible long-term care premiums means the amount paid during a taxable year for any qualified long-term care insurance contract 7as defined in section #ggjb;,b7b77 covering an individual1 to the extent such amount does not exceed the limitation determined under the following table3 ,in the case of an individual with an attained age before the close of the taxable year of3,the limitation is3 #dj or less#bjj ,more than #dj but not more than #ejcge ,more than #ej but not more than #fjgej ,more than #fj but not more than #gjb1jjj ,more than #gjb1ejj 7,b7 ,indexing 7i7 ,in general ,in the case of any taxable year beginning after #aiig1 each dollar amount in subparagraph 7,a7 shall be increased by the medical care cost adjustment of such amount for such calendar year4 ,any increase determined under the preceding sentence shall be rounded to the nearest multiple of #aj4 7ii7 ,medical care cost adjustment ,for purposes of clause 7i71 the medical care cost adjustment for any calendar year is the adjustment prescribed by the ,secretary1 in consultation with the ,secretary of ,health and ,human ,services1 for purposes of such clause4 ,to the extent that ,,cpi 7as defined section #a7;c771 or any component thereof1 is taken into account in determining such adjustment1 such adjustment shall be determined by taking into account ,c-,,cpi-,u 7as so defined71 or the corresponding component thereof1 in lieu of such ,,cpi 7or component thereof71 but only with respect to the portion of such adjustment which relates to periods after ,december #ca1 #bjag4 7#h7 ,certain payments to relatives treated as not paid for medical care ,an amount paid for a qualified long-term care service 7as defined in section #ggjb;,b7c77 provided to an individual shall be treated as not paid for medical care if such service is provided-- 7,a7 by the spouse of the individual or by a relative 7directly or through a partnership1 corporation1 or other entity7 unless the service is provided by a licensed professional with respect to such service1 or 7,b7 by a corporation or partnership which is related 7within the meaning of section #bfg7;b7 or #gjg7;b77 to the individual4 ,for purposes of this paragraph1 the term relative means an individual bearing a relationship to the individual which is described in any of subparagraphs 7,a7 through 7,g7 of section #ggjf7;d77#b74 ,this paragraph shall not apply for purposes of subsection 7b7 with respect to reimbursements through insurance4 4 7,b7 ,section #gb7t77#b77;,d77i77,,iii7 is amended by striking section #bac7;d77#a77;,d7 and inserting section #aje7;f77#a77;,d74 7,c7 ,section #ajd7;a7 is amended by striking section #bac7;d77#a7 in the last sentence and inserting section #aje7;f77#a74 7,d7 ,section #aje7;b7 is amended by striking section #bac7;d7 and inserting section #aje7;f74 7,e7 ,section #aci;,d is amended by striking section #bac and inserting section #bbc4 7,f7 ,section #afb7l77#b7 is amended by striking section #bac7;d77#aj7 and inserting section #aje7;f77#g74 7,g7 ,section #bbj7;d77#b77;,a7 is amended by striking section #bac7;d7 and inserting section #aje7;f74 7,h7 ,section #bbc7;d77#b77;,a7 is amended by striking section #bac7;d7 and inserting section #aje7;f74 7,i7 ,section #dai;,a7f77#b7 is amended by striking section #bac7;d7 and inserting section #aje7;f74 7,j7 ,section #eja7;c77#bf77;,a7 is amended by striking section #bac7;d7 and inserting section #aje7;f74 7,k7 ,section #bejc7;e7 is amended by striking section #bac7;d7 and inserting section #aje7;f74 7,l7 ,section #dihj;,b7c77#d77;,b77i77,i7 is amended by striking section #bac7;d7 and inserting section #aje7;f74 7,m7 ,section #fjda7;f7 is amended by striking section #bac7;d7 and inserting section #aje7;f74 7,n7 ,section #ggjb;,b7a77#b7 is amended by striking section #bac7;d7 and inserting section #aje7;f74 7,o7 ,section #ggjb;,b7a77#d7 is amended by striking section #bac7;d77#a77;,d7 and inserting section #aje7;f77#a77;,d74 7,p7 ,section #ggjb;,b7d77#e7 is amended by striking section #bac7;d77#aj7 and inserting section #aje7;f77#g74 7,q7 ,section #ihcb7;d77#c7 is amended by striking section #bac7;d7 and inserting section #aje7;f74 7#b7 ,section #gb7t77#b77;,b7 is amended to read as follows3 7,b7 ,medical expenses ,distributions made to an individual 7other than distributions described in subparagraph 7,a71 7,c71 or 7,d7 to the extent such distributions do not exceed the excess of-- 7i7 the expenses paid by the taxpayer during the taxable year1 not compensated for by insurance or otherwise1 for medical care 7as defined in #aje7;f77 of the taxpayer1 his spouse1 or a dependent 7as defined in section #ggjf1 determined without regard to subsections 7b77#a71 7b77#b71 and 7d77#a77;,b7 thereof71 over 7ii7 #aj percent of the taxpayer's adjusted gross income4 4 7#c7 ,section #afb7l7 is amended by striking paragraph 7#c74 7#d7 ,section #djb7l7 is amended by striking paragraph 7#g7 and redesignating paragraph 7#h7 as paragraph 7#g74 7#e7 ,section #bbj7;f7 is amended by striking paragraph 7#f74 7#f7 ,section #bbc7;f7 is amended by striking paragraph 7#f74 7#g7 ,section #ggjb;,b7e7 is amended by striking paragraph 7#b74 7#h7 ,section #ggjf7;f77#g71 as redesignated by this ,act1 is amended by striking sections #aje7;b71 #acb7;h77#b77;,b71 and #bac7;d77#e7 and inserting sections #aje7;b7 and #acb7;h77#b77;,b74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acji4 ,repeal of deduction for alimony payments 7a7 ,in general ,part ,,vii of subchapter ,b is amended by striking by striking section #bae 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,corresponding repeal of provisions providing for inclusion of alimony in gross income 7,a7 ,subsection 7a7 of section #fa is amended by striking paragraph 7#h7 and by redesignating paragraphs 7#i7 through 7#ae7 as paragraphs 7#h7 through 7#ad71 respectively4 7,b7 ,part ,,ii of subchapter ,b of chapter #a is amended by striking section #ga 7and by striking the item relating to such section in the table of sections for such part74 7,c7 ,subpart ,f of part ,i of subchapter ,j of chapter #a is amended by striking section #fhb 7and by striking the item relating to such section in the table of sections for such subpart74 7#b7 ,related to repeal of section #bae 7,a7 ,section #fb7;a7 is amended by striking paragraph 7#aj74 7,b7 ,section #cdjb7m77#a7 is amended by striking 7other than paragraph 7#aj7 thereof74 7#c7 ,related to repeal of section #ga 7,a7 ,section #aba7;d77#c7 is amended-- 7i7 by striking 7as defined in section #ga7;b77#b77 in subparagraph 7,b71 and 7ii7 by adding at the end the following new subparagraph3 7,c7 ,divorce or separation instrument ,for purposes of this paragraph1 the term divorce or separation instrument means-- 7i7 a decree of divorce or separate maintenance or a written instrument incident to such a decree1 7ii7 a written separation agreement1 or 7iii7 a decree 7not described in clause 7i77 requiring a spouse to make payments for the support or maintenance of the other spouse4 4 7,b7 ,section #bbj7;f77#g7 is amended by striking subparagraph 7,a7 of section #ga7;b77#b7 and inserting clause 7i7 of section #aba7;d77#c77;,c74 7,c7 ,section #bbc7;f77#g7 is amended by striking subparagraph 7,a7 of section #ga7;b77#b7 and inserting clause 7i7 of section #aba7;d77#c77;,c74 7,d7 ,section #chb7l77#c77;,b77iii7 is amended by striking section #ga7;b77#b7 and inserting section #aba7;d77#c77;,c74 7,e7 ,section #djh7;d77#f7 is amended by striking subparagraph 7,a7 of section #ga7;b77#b7 and inserting clause 7i7 of section #aba7;d77#c77;,c74 7c7 ,effective date ,the amendments made by this section shall apply to-- 7#a7 any divorce or separation instrument 7as defined in section #ga7;b77#b7 of the ,internal ,revenue ,code of #aihf as in effect before the date of the enactment of this ,act7 executed after ,december #ca1 #bjag1 and 7#b7 any divorce or separation instrument 7as so defined7 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 modification4 #acaj4 ,repeal of deduction for moving expenses 7a7 ,in general ,part ,,vii of subchapter ,b is amended by striking by striking section #bag 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,retention of moving expenses for members of ,armed ,forces ,section #acd7;b7 is amended by adding at the end the following new paragraph3 7#g7 ,moving expenses ,the term qualified military benefit includes any benefit described in section #bag7;g7 7as in effect before the enactment of the ,tax ,cuts ,and ,jobs ,act74 4 7c7 ,conforming amendments 7#a7 ,section #fb7;a7 is amended by striking paragraph 7#ae74 7#b7 ,section #bgd7m77#c7 is amended by striking 7other than section #bag74 7#c7 ,section #caba7;a7 is amended by striking paragraph 7#aa74 7#d7 ,section #ccjf7;b7 is amended by striking paragraph 7#i74 7#e7 ,section #cdja7;a7 is amended by striking paragraph 7#ae74 7#f7 ,section #ghgb7;f7 is amended by striking paragraph 7#aa74 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acaa4 ,termination of deduction and exclusions for contributions to medical savings accounts 7a7 ,termination of income tax deduction ,section #bbj is amended by adding at the end the following new subsection3 7k7 ,termination ,no deduction shall be allowed under subsection 7a7 with respect to any taxable year beginning after ,december #ca1 #bjag4 4 7b7 ,termination of exclusion for employer-,provided contributions ,section #ajf is amended by striking subsection 7b74 7c7 ,conforming amendments 7#a7 ,section #fb7;a7 is amended by striking paragraph 7#af74 7#b7 ,section #ajf7;d7 is amended by striking paragraph 7#b71 by redesignating paragraph 7#c7 as paragraph 7#f71 and by inserting after paragraph 7#a7 the following new paragraphs3 7#b7 ,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 7#a7 and employer contributions to another health plan of the employer4 7#c7 ,special rule for deduction of employer contributions ,any employer contribution to a health savings account 7as so defined71 if otherwise allowable as a deduction under this chapter1 shall be allowed only for the taxable year in which paid4 7#d7 ,employer health savings account contribution required to be shown on return ,every individual required to file a return under section #fjab for the taxable year shall include on such return the aggregate amount contributed by employers to the health savings accounts 7as so defined7 of such individual or such individual's spouse for such taxable year4 7#e7 ,health savings account contributions not part of ,,cobra coverage ,paragraph 7#a7 shall not apply for purposes of section #dihj;,b4 4 7#c7 ,section #bbc7;b77#d7 is amended by striking subparagraph 7,a71 by redesignating subparagraphs 7,b7 and 7,c7 as subparagraphs 7,a7 and 7,b71 respectively1 and by striking the second sentence thereof4 7#d7 ,section #bbc7;b77#e7 is amended by striking under paragraph 7#c77 and all that follows through shall be divided equally between them and inserting the following3 under paragraph 7#c77 shall be divided equally between the spouses4 7#e7 ,section #bbc7;c7 is amended by striking paragraph 7#e74 7#f7 ,section #cbca7;e7 is amended by striking paragraph 7#aj74 7#g7 ,section #ccjf7;b7 is amended by striking paragraph 7#ag74 7#h7 ,section #cdja7;a7 is amended by striking paragraph 7#ba74 7#i7 ,chapter #dc is amended by striking section #dihj;,e 7and by striking the item relating to such section in the table of sections for such chapter74 7#aj7 ,section #dihj;,g is amended to read as follows3 #dihj;,g4 ,failure of employer to make comparable health savings account contributions 7a7 ,in general ,in the case of an employer who makes a contribution to the health savings account of any employee during a calendar year1 there is hereby imposed a tax on the failure of such employer to meet the requirements of subsection 7d7 for such calendar year4 7b7 ,amount of tax ,the amount of the tax imposed by subsection 7a7 on any failure for any calendar year is the amount equal to #ce 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 year4 7c7 ,waiver by ,secretary ,in the case of a failure which is due to reasonable cause and not to willful neglect1 the ,secretary may waive part or all of the tax imposed by subsection 7a7 to the extent that the payment of such tax would be excessive relative to the failure involved4 7d7 ,employer required ,to make comparable health savings account contributions for all participating employees 7#a7 ,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 year4 7#b7 ,comparable contributions 7,a7 ,in general ,for purposes of paragraph 7#a71 the term comparable contributions means contributions-- 7i7 which are the same amount1 or 7ii7 which are the same percentage of the annual deductible limit under the high deductible health plan covering the employees4 7,b7 ,part-year employees ,in the case of an employee who is employed by the employer for only a portion of the calendar year1 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 7determined without regard to this subparagraph7 as such portion bears to the entire calendar year4 7#c7 ,comparable participating employees 7,a7 ,in general ,for purposes of paragraph 7#a71 the term comparable participating employees means all employees-- 7i7 who are eligible individuals covered under any high deductible health plan of the employer1 and 7ii7 who have the same category of coverage4 7,b7 ,categories of coverage ,for purposes of subparagraph 7,b71 the categories of coverage are self-only and family coverage4 7#d7 ,part-time employees 7,a7 ,in general ,paragraph 7#c7 shall be applied separately with respect to part-time employees and other employees4 7,b7 ,part-time employee ,for purposes of subparagraph 7,a71 the term part-time employee means any employee who is customarily employed for fewer than #cj hours per week4 7#e7 ,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 7as defined in section #dad7q771 highly compensated employees shall not be treated as comparable participating employees4 7e7 ,controlled groups ,for purposes of this section1 all persons treated as a single employer under subsection 7b71 7c71 7m71 or 7o7 of section #dad shall be treated as #a employer4 7f7 ,definitions ,terms used in this section which are also used in section #bbc have the respective meanings given such terms in section #bbc4 7g7 ,regulations ,the ,secretary shall issue regulations to carry out the purposes of this section4 4 7#aa7 ,section #fjea7;a7 is amended by striking paragraph 7#aa74 7#ab7 ,section #fjea7;a77#ad77;,a7 is amended by striking paragraphs 7#aa7 and 7#ab7 and inserting paragraph 7#ab74 7d7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acab4 ,denial of deduction for expenses attributable to the trade or business of being an employee 7a7 ,in general ,part ,,ix of subchapter ,b of chapter #a is amended by inserting after the item relating to section #bfb the following new item3 #bfb;,a4 ,expenses attributable to being an employee 7a7 ,in general ,except as otherwise provided in this section1 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 employee4 7b7 ,exception for above-the-line deductions ,subsection 7a7 shall not apply to any deduction allowable 7determined without regard to subsection 7a77 in determining adjusted gross income4 4 7b7 ,repeal of certain above-the-line trade and business deductions of employees 7#a7 ,in general ,section #fb7;a77#b7 is amended-- 7,a7 by striking subparagraphs 7,b71 7,c71 and 7,d71 and 7,b7 by redesignating subparagraph 7,e7 as subparagraph 7,b74 7#b7 ,conforming amendments 7,a7 ,section #fb is amended by striking subsections 7b7 and 7d7 and by redesignating subsections 7c7 and 7e7 as subsections 7b7 and 7c71 respectively4 7,b7 ,section #fb7;a77#bj7 is amended by striking subsection 7e7 and inserting subsection 7c74 7c7 ,continued exclusion of working condition fringe benefits ,section #acb7;d7 is amended by inserting 7determined without regard to section #bfb;,a7 after section #afb4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,e ,simplification and reform of exclusions and taxable compensation #adja4 ,limitation on exclusion for employer-provided housing 7a7 ,in general ,section #aai is amended by adding at the end the following new subsection3 7e7 ,limitation on exclusion of lodging 7#a7 ,in general ,the aggregate amount excluded from gross income of the taxpayer under subsections 7a7 and 7d7 with respect to lodging for any taxable year shall not exceed #ej1jjj 7half such amount in the case of a married individual filing a separate return74 7#b7 ,limitation to #a home ,subsections 7a7 and 7d7 7separately and in combination7 shall not apply with respect to more than #a residence of the taxpayer at any given time4 ,in the case of a joint return1 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 spouse1 respectively4 7#c7 ,limitation for highly compensated employees 7,a7 ,reduced for excess compensation ,in the case of an individual whose compensation for the taxable year exceeds the amount in effect under section #dad7q77#a77;,b77i7 for the calendar in which such taxable year begins1 the #ej1jjj amount under paragraph 7#a7 shall be reduced 7but not below zero7 by an amount equal to #ej percent of such excess4 ,for purposes of the preceding sentence1 the term compensation means wages 7as defined in section #caba7;a7 7without regard to the contribution and benefit base limitation in section #caba7;a77#a774 7,b7 ,exclusion denied for #e-percent owners ,in the case of an individual who is a #e-percent owner 7as defined in section #daf7;i77#a77;,b77i77 of the employer at any time during the taxable year1 the amount under paragraph 7#a7 shall be zero4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #adjb4 ,exclusion of gain from sale of a principal residence 7a7 ,requirement that residence be principal residence for #e years during #h-year period ,subsection 7a7 of section #aba is amended-- 7#a7 by striking #e-year period and inserting #h-year period1 and 7#b7 by striking #b years and inserting #e years4 7b7 ,application to only #a sale or exchange every #e years ,paragraph 7#c7 of section #aba7;b7 is amended to read as follows3 7#c7 ,application to only #a sale or exchange every #e years ,subsection 7a7 shall not apply to any sale or exchange by the taxpayer if1 during the #e-year period ending on the date of such sale or exchange1 there was any other sale or exchange by the taxpayer to which subsection 7a7 applied4 4 7c7 ,phaseout based on modified adjusted gross income ,section #aba is amended by adding at the end the following new subsection3 7h7 ,phaseout based on modified adjusted gross income 7#a7 ,in general ,if the average modified adjusted gross income of the taxpayer for the taxable year and the #b preceding taxable years exceeds #bej1jjj 7twice such amount in the case of a joint return71 the amount which would 7but for this subsection7 be excluded from gross income under subsection 7a7 for such taxable year shall be reduced 7but not below zero7 by the amount of such excess4 7#b7 ,modified adjusted gross income ,for purposes of this subsection1 the term modified adjusted gross income means1 with respect to any taxable year1 adjusted gross income determined after application of this section 7but without regard to subsection 7b77#a7 and this subsection74 7#c7 ,special rule for joint returns ,in the case of a joint return1 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 return4 4 7d7 ,conforming amendments 7#a7 ,the following provisions of section #aba are each amended by striking #e-year period each place it appears therein and inserting #h-year period3 7,a7 ,subsection 7b77#e77;,c77ii77,i74 7,b7 ,subsection 7c77#a77;,b77i77,i74 7,c7 ,subsection 7d77#g77;,b74 7,d7 ,subparagraphs 7,a7 and 7,b7 of subsection 7d77#i74 7,e7 ,subsection 7d77#aj74 7,f7 ,subsection 7d77#ab77;,a74 7#b7 ,section #aba7;c77#a77;,b77ii7 is amended by striking #b years and inserting #e years3 7e7 ,effective date ,the amendments made by this section shall apply to sales and exchanges after ,december #ca1 #bjag4 #adjc4 ,repeal of exclusion1 etc41 for employee achievement awards 7a7 ,in general ,section #gd is amended by striking subsection 7c74 7b7 ,repeal of limitation on deduction ,section #bgd is amended by striking subsection 7j74 7c7 ,conforming amendments 7#a7 ,section #ajb7;c77#b7 is amended by striking the first sentence4 7#b7 ,section #dad7n77#c77;,c7 is amended by striking #bgd7;j714 7#c7 ,section #dad7t77#b7 is amended by striking #bgd7;j714 7#d7 ,section #caba7;a77#bj7 is amended by striking #gd7;c74 7#e7 ,section #cbca7;e77#e7 is amended by striking #gd7;c714 7#f7 ,section #ccjf7;b77#af7 is amended by striking #gd7;c714 7#g7 ,section #cdja7;a77#ai7 is amended by striking #gd7;c714 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #adjd4 ,sunset of exclusion for dependent care assistance programs 7a7 ,in general ,section #abi is amended by adding at the end the following new subsection3 7f7 ,termination ,subsection 7a7 shall not apply to taxable years beginning after ,december #ca1 #bjbb4 4 7b7 ,effective date ,the amendment made by this section shall take effect on the date of the enactment of this ,act4 #adje4 ,repeal of exclusion for qualified moving expense reimbursement 7a7 ,in general ,section #acb7;a7 is amended by striking paragraph 7#f74 7b7 ,conforming amendments 7#a7 ,section #hb is amended by striking ,except as provided in section #acb7;a77#f71 there and inserting ,there4 7#b7 ,section #acb is amended by striking subsection 7g74 7#c7 ,section #acb7l7 is amended by striking by striking subsections 7e7 and 7g7 and inserting subsection 7e74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #adjf4 ,repeal of exclusion for adoption assistance programs 7a7 ,in general ,part ,,iii of subchapter ,b of chapter #a is amended by striking section #acg 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 ,sections #dad7n77#c77;,c71 #dad7t77#b71 #gd7;d77#b77;,b71 #hf7;b77#b77;,a71 #bai7;g77#c77;,a77ii7 are each amended by striking 1 #acg4 7#b7 ,section #ajaf7;a71 as amended by the preceding provision of this ,act1 is amended by striking paragraph 7#bf74 7#c7 ,section #fjci;,d7d77#a71 as amended by the preceding provisions of this ,act1 is amended-- 7,a7 by striking 1 or #acg1 and 7,b7 by inserting or before #abe4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,f ,simplification and reform of savings1 pensions1 retirement #aeja4 ,repeal of special rule permitting recharacterization of ,roth ,,ira contributions as traditional ,,ira contributions 7a7 ,in general ,section #djh;,a7d7 is amended by striking paragraph 7#f7 and by redesignating paragraph 7#g7 as paragraph 7#f74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aejb4 ,reduction in minimum age for allowable in-service distributions 7a7 ,in general ,section #dja7;a77#cf7 is amended by striking age #fb and inserting age #ei 4 7b7 ,application to governmental section #deg7;b7 plans ,clause 7i7 of section #deg7;d77#a77;,a7 is amended by inserting 7in the case of a plan maintained by an employer described in subsection 7e77#a77;,a71 age #ei 7 before the comma at the end4 7c7 ,effective date ,the amendments made by this section shall apply to plan years beginning after ,december #ca1 #bjag4 #aejc4 ,modification of rules governing hardship distributions 7a7 ,in general ,not later than #a year after the date of the enactment of this ,act1 the ,secretary of the ,treasury shall modify ,treasury ,regulation section #a4dja7k7-#a7;d77#c77;iv77,e7 to-- 7#a7 delete the #f-month prohibition on contributions imposed by paragraph 7#b7 thereof1 and 7#b7 make any other modifications necessary to carry out the purposes of section #dja7k77#b77;,b77i77,,iv7 of the ,internal ,revenue ,code of #aihf4 7b7 ,effective date ,the revised regulations under this section shall apply to plan years beginning after ,december #ca1 #bjag4 #aejd4 ,modification of rules relating to hardship withdrawals from cash or deferred arrangements 7a7 ,in general ,section #dja7k7 is amended by adding at the end the following3 7#ad7 ,special rules relating to hardship withdrawals ,for purposes of paragraph 7#b77;,b77i77,,iv7-- 7,a7 ,amounts which may be withdrawn ,the following amounts may be distributed upon hardship of the employee3 7i7 ,contributions to a profit-sharing or stock bonus plan to which section #djb7;e77#c7 applies4 7ii7 ,qualified nonelective contributions 7as defined in subsection 7m77#d77;,c774 7iii7 ,qualified matching contributions described in paragraph 7#c77;,d77ii77,i74 7iv7 ,earnings on any contributions described in clause 7i71 7ii71 or 7iii74 7,b7 ,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 plan44 4 7b7 ,conforming amendment ,section #dja7k77#b77;,b77i77,,iv7 is amended to read as follows3 7,,iv7 subject to the provisions of paragraph 7#ad71 upon hardship of the employee1 or4 4 7c7 ,effective date ,the amendments made by this section shall apply to plan years beginning after ,december #ca1 #bjag4 #aeje4 ,extended rollover period for the rollover of plan loan offset amounts in certain cases 7a7 ,in general ,paragraph 7#c7 of section #djb7;c7 is amended by adding at the end the following new subparagraph3 7,c7 ,rollover of certain plan loan offset amounts 7i7 ,in general ,in the case of a qualified plan loan offset amount1 paragraph 7#a7 shall not apply to any transfer of such amount made after the due date 7including extensions7 for filing the return of tax for the taxable year in which such amount is treated as distributed from a qualified employer plan4 7ii7 ,qualified plan loan offset amount ,for purposes of this subparagraph1 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-- 7,i7 the termination of the qualified employer plan1 or 7,,ii7 the failure to meet the repayment terms of the loan from such plan because of the separation from service of the participant 7whether due to layoff1 cessation of business1 termination of employment1 or otherwise74 7iii7 ,plan loan offset amount ,for purposes of clause 7ii71 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 plan4 7iv7 ,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 #gb7p77#a7 does not apply by reason of section #gb7p77#b74 7v7 ,qualified employer plan ,for purposes of this subsection1 the term qualified employer plan has the meaning given such term by section #gb7p77#d74 4 7b7 ,conforming amendment ,subparagraph 7,a7 of section #djb7;c77#c7 is amended by striking subparagraph 7,b7 and inserting subparagraphs 7,b7 and 7,c74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aejf4 ,modification of nondiscrimination rules to protect older1 longer service participants 7a7 ,in general ,section #dja is amended-- 7#a7 by redesignating subsection 7o7 as subsection 7p71 and 7#b7 by inserting after subsection 7n7 the following new subsection3 7o7 ,special rules for applying nondiscrimination rules to protect older1 longer service and grandfathered participants 7#a7 ,testing of defined benefit plans with closed classes of participants 7,a7 ,benefits1 rights1 or features provided to closed classes ,a defined benefit plan which provides benefits1 rights1 or features to a closed class of participants shall not fail to satisfy the requirements of subsection 7a77#d7 by reason of the composition of such closed class or the benefits1 rights1 or features provided to such closed class1 if-- 7i7 for the plan year as of which the class closes and the #b succeeding plan years1 such benefits1 rights1 and features satisfy the requirements of subsection 7a77#d7 7without regard to this subparagraph but taking into account the rules of subparagraph 7,i771 7ii7 after the date as of which the class was closed1 any plan amendment which modifies the closed class or the benefits1 rights1 and features provided to such closed class does not discriminate significantly in favor of highly compensated employees1 and 7iii7 the class was closed before ,april #e1 #bjag1 or the plan is described in subparagraph 7,c74 7,b7 ,aggregate testing with defined contribution plans permitted on a benefits basis 7i7 ,in general ,for purposes of determining compliance with subsection 7a77#d7 and section #daj7;b71 a defined benefit plan described in clause 7iii7 may be aggregated and tested on a benefits basis with #a or more defined contribution plans1 including with the portion of #a or more defined contribution plans which-- 7,i7 provides matching contributions 7as defined in subsection 7m77#d77;,a771 7,,ii7 provides annuity contracts described in section #djc7;b7 which are purchased with matching contributions or nonelective contributions1 or 7,,iii7 consists of an employee stock ownership plan 7within the meaning of section #dige7;e77#g77 or a tax credit employee stock ownership plan 7within the meaning of section #dji7;a774 7ii7 ,special rules for matching contributions ,for purposes of clause 7i71 if a defined benefit plan is aggregated with a portion of a defined contribution plan providing matching contributions-- 7,i7 such defined benefit plan must also be aggregated with any portion of such defined contribution plan which provides elective deferrals described in subparagraph 7,a7 or 7,c7 of section #djb7;g77#c71 and 7,,ii7 such matching contributions shall be treated in the same manner as nonelective contributions1 including for purposes of applying the rules of subsection 7l74 7iii7 ,plans described ,a defined benefit plan is described in this clause if-- 7,i7 the plan provides benefits to a closed class of participants1 7,,ii7 for the plan year as of which the class closes and the #b succeeding plan years1 the plan satisfies the requirements of section #daj7;b7 and subsection 7a77#d7 7without regard to this subparagraph but taking into account the rules of subparagraph 7,i771 7,,iii7 after the date as of which the class was closed1 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 employees1 and 7,,iv7 the class was closed before ,april #e1 #bjag1 or the plan is described in subparagraph 7,c74 7,c7 ,plans described ,a plan is described in this subparagraph if1 taking into account any predecessor plan-- 7i7 such plan has been in effect for at least #e years as of the date the class is closed1 and 7ii7 during the #e-year period preceding the date the class is closed1 there has not been a substantial increase in the coverage or value of the benefits1 rights1 or features described in subparagraph 7,a7 or in the coverage or benefits under the plan described in subparagraph 7,b77iii7 7whichever is applicable74 7,d7 ,determination of substantial increase for benefits1 rights1 and features ,in applying subparagraph 7,c77ii7 for purposes of subparagraph 7,a77iii71 a plan shall be treated as having had a substantial increase in coverage or value of the benefits1 rights1 or features described in subparagraph 7,a7 during the applicable #e-year period only if1 during such period-- 7i7 the number of participants covered by such benefits1 rights1 or features on the date such period ends is more than #ej percent greater than the number of such participants on the first day of the plan year in which such period began1 or 7ii7 such benefits1 rights1 and features have been modified by #a or more plan amendments in such a way that1 as of the date the class is closed1 the value of such benefits1 rights1 and features to the closed class as a whole is substantially greater than the value as of the first day of such #e-year period1 solely as a result of such amendments4 7,e7 ,determination of substantial increase for aggregate testing on benefits basis ,in applying subparagraph 7,c77ii7 for purposes of subparagraph 7,b77iii77,,iv71 a plan shall be treated as having had a substantial increase in coverage or benefits during the applicable #e-year period only if1 during such period-- 7i7 the number of participants benefitting under the plan on the date such period ends is more than #ej percent greater than the number of such participants on the first day of the plan year in which such period began1 or 7ii7 the average benefit provided to such participants on the date such period ends is more than #ej percent greater than the average benefit provided on the first day of the plan year in which such period began4 7,f7 ,certain employees disregarded ,for purposes of subparagraphs 7,d7 and 7,e71 any increase in coverage or value or in coverage or benefits1 whichever is applicable1 which is attributable to such coverage and value or coverage and benefits provided to employees-- 7i7 who became participants as a result of a merger1 acquisition1 or similar event which occurred during the #g-year period preceding the date the class is closed1 or 7ii7 who became participants by reason of a merger of the plan with another plan which had been in effect for at least #e years as of the date of the merger1 shall be disregarded1 except that clause 7ii7 shall apply for purposes of subparagraph 7,d7 only if1 under the merger1 the benefits1 rights1 or features under #a plan are conformed to the benefits1 rights1 or features of the other plan prospectively4 7,g7 ,rules relating to average benefit ,for purposes of subparagraph 7,e7-- 7i7 the average benefit provided to participants under the plan will be treated as having remained the same between the #b dates described in subparagraph 7,e77ii7 if the benefit formula applicable to such participants has not changed between such dates1 and 7ii7 if the benefit formula applicable to #a or more participants under the plan has changed between such #b dates1 then the average benefit under the plan shall be considered to have increased by more than #ej percent only if-- 7,i7 the total amount determined under section #dcj7;b77#a77;,a77i7 for all participants benefitting under the plan for the plan year in which the #e-year period described in subparagraph 7,e7 ends1 exceeds 7,,ii7 the total amount determined under section #dcj7;b77#a77;,a77i7 for all such participants for such plan year1 by using the benefit formula in effect for each such participant for the first plan year in such #e-year period1 by more than #ej percent4 ,in the case of a ,,csec plan 7as defined in section #dad7y771 the normal cost of the plan 7as determined under section #dcc7;j77#a77;,b77 shall be used in lieu of the amount determined under section #dcj7;b77#a77;,a77i74 7,h7 ,treatment as single plan ,for purposes of subparagraphs 7,e7 and 7,g71 a plan described in section #dac7;c7 shall be treated as a single plan rather than as separate plans maintained by each participating employer4 7,i7 ,special rules ,for purposes of subparagraphs 7,a77i7 and 7,b77iii77,,ii71 the following rules shall apply3 7i7 ,in applying section #daj7;b77#f77;,c71 the closing of the class of participants shall not be treated as a significant change in coverage under section #daj7;b77#f77;,c77i77,,ii74 7ii7 #b 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 years4 7iii7 ,changes in the employee population shall be disregarded to the extent attributable to individuals who become employees or cease to be employees1 after the date the class is closed1 by reason of a merger1 acquisition1 divestiture1 or similar event4 7iv7 ,aggregation and all other testing methodologies otherwise applicable under subsection 7a77#d7 and section #daj7;b7 may be taken into account4 ,the rule of clause 7ii7 shall also apply for purposes of determining whether plans to which subparagraph 7,b77i7 applies may be aggregated and treated as #a plan for purposes of determining whether such plans meet the requirements of subsection 7a77#d7 and section #daj7;b74 7,j7 ,spun-off plans ,for purposes of this paragraph1 if a portion of a defined benefit plan described in subparagraph 7,a7 or 7,b77iii7 is spun off to another employer and the spun-off plan continues to satisfy the requirements of-- 7i7 subparagraph 7,a77i7 or 7,b77iii77,,ii71 whichever is applicable1 if the original plan was still within the #c-year period described in such subparagraph at the time of the spin off1 and 7ii7 subparagraph 7,a77ii7 or 7,b77iii77,,iii71 whichever is applicable1 the treatment under subparagraph 7,a7 or 7,b7 of the spun-off plan shall continue with respect to such other employer4 7#b7 ,testing of defined contribution plans 7,a7 ,testing on a benefits basis ,a defined contribution plan shall be permitted to be tested on a benefits basis if-- 7i7 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 eliminated1 7ii7 for the plan year of the defined contribution plan as of which the class eligible to receive such make-whole contributions closes and the #b succeeding plan years1 such closed class of participants satisfies the requirements of section #daj7;b77#b77;,a77i7 7determined by applying the rules of paragraph 7#a77;,i771 7iii7 after the date as of which the class was closed1 any plan amendment to the defined contribution plan which modifies the closed class or the allocations1 benefits1 rights1 and features provided to such closed class does not discriminate significantly in favor of highly compensated employees1 and 7iv7 the class was closed before ,april #e1 #bjag1 or the defined benefit plan under clause 7i7 is described in paragraph 7#a77;,c7 7as applied for purposes of paragraph 7#a77;,b77iii77,,iv774 7,b7 ,aggregation with plans including matching contributions 7i7 ,in general ,with respect to #a or more defined contribution plans described in subparagraph 7,a71 for purposes of determining compliance with subsection 7a77#d7 and section #daj7;b71 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 #a or more other defined contribution plans which-- 7,i7 provides matching contributions 7as defined in subsection 7m77#d77;,a771 7,,ii7 provides annuity contracts described in section #djc7;b7 which are purchased with matching contributions or nonelective contributions1 or 7,,iii7 consists of an employee stock ownership plan 7within the meaning of section #dige7;e77#g77 or a tax credit employee stock ownership plan 7within the meaning of section #dji7;a774 7ii7 ,special rules for matching contributions ,rules similar to the rules of paragraph 7#a77;,b77ii7 shall apply for purposes of clause 7i74 7,c7 ,special rules for testing defined contribution plan features providing matching contributions to certain older1 longer service participants ,in the case of a defined contribution plan which provides benefits1 rights1 or features to a closed class of participants whose accruals under a defined benefit plan have been reduced or eliminated1 the plan shall not fail to satisfy the requirements of subsection 7a77#d7 solely by reason of the composition of the closed class or the benefits1 rights1 or features provided to such closed class if the defined contribution plan and defined benefit plan otherwise meet the requirements of subparagraph 7,a7 but for the fact that the make-whole contributions under the defined contribution plan are made in whole or in part through matching contributions4 7,d7 ,spun-off plans ,for purposes of this paragraph1 if a portion of a defined contribution plan described in subparagraph 7,a7 or 7,c7 is spun off to another employer1 the treatment under subparagraph 7,a7 or 7,c7 of the spun-off plan shall continue with respect to the other employer if such plan continues to comply with the requirements of clauses 7ii7 7if the original plan was still within the #c-year period described in such clause at the time of the spin off7 and 7iii7 of subparagraph 7,a71 as determined for purposes of subparagraph 7,a7 or 7,c71 whichever is applicable4 7#c7 ,definitions ,for purposes of this subsection-- 7,a7 ,make-whole contributions ,except as otherwise provided in paragraph 7#b77;,c71 the term make-whole contributions means nonelective allocations for each employee in the class which are reasonably calculated1 in a consistent manner1 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 7k77#b7 if no change had been made to such defined benefit plan and such other plan or arrangement4 ,for purposes of the preceding sentence1 consistency shall not be required with respect to employees who were subject to different benefit formulas under the defined benefit plan4 7,b7 ,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 #a or more classes of participants are closed1 except that #a or more classes of participants closed on different dates shall not be aggregated for purposes of determining the date any such class was closed4 7,c7 ,highly compensated employee ,the term highly compensated employee has the meaning given such term in section #dad7q744 4 7b7 ,participation requirements ,paragraph 7#bf7 of section #dja7;a7 is amended by adding at the end the following new subparagraph3 7,i7 ,protected participants 7i7 ,in general ,a plan shall be deemed to satisfy the requirements of subparagraph 7,a7 if-- 7,i7 the plan is amended-- 7aa7 to cease all benefit accruals1 or 7bb7 to provide future benefit accruals only to a closed class of participants1 7,,ii7 the plan satisfies subparagraph 7,a7 7without regard to this subparagraph7 as of the effective date of the amendment1 and 7,,iii7 the amendment was adopted before ,april #e1 #bjag1 or the plan is described in clause 7ii74 7ii7 ,plans described ,a plan is described in this clause if the plan would be described in subsection 7o77#a77;,c71 as applied for purposes of subsection 7o77#a77;,b77iii77,,iv7 and by treating the effective date of the amendment as the date the class was closed for purposes of subsection 7o77#a77;,c74 7iii7 ,special rules ,for purposes of clause 7i77,,ii71 in applying section #daj7;b77#f77;,c71 the amendments described in clause 7i7 shall not be treated as a significant change in coverage under section #daj7;b77#f77;,c77i77,,ii74 7iv7 ,spun-off plans ,for purposes of this subparagraph1 if a portion of a plan described in clause 7i7 is spun off to another employer1 the treatment under clause 7i7 of the spun-off plan shall continue with respect to the other employer4 4 7c7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall take effect on the date of the enactment of this ,act1 without regard to whether any plan modifications referred to in such amendments are adopted or effective before1 on1 or after such date of enactment4 7#b7 ,special rules 7,a7 ,election of earlier application ,at the election of the plan sponsor1 the amendments made by this section shall apply to plan years beginning after ,december #ca1 #bjac4 7,b7 ,closed classes of participants ,for purposes of paragraphs 7#a77;,a77iii71 7#a77;,b77iii77,,iv71 and 7#b77;,a77iv7 of section #dja7o7 of the ,internal ,revenue ,code of #aihf 7as added by this section71 a closed class of participants shall be treated as being closed before ,april #e1 #bjag1 if the plan sponsor's intention to create such closed class is reflected in formal written documents and communicated to participants before such date4 7,c7 ,certain post-enactment plan amendments ,a plan shall not be treated as failing to be eligible for the application of section #dja7o77#a77;,a71 #dja7o77#a77;,b77iii71 or #dja7;a77#bf7 of such ,code 7as added by this section7 to such plan solely because in the case of-- 7i7 such section #dja7o77#a77;,a71 the plan was amended before the date of the enactment of this ,act to eliminate #a or more benefits1 rights1 or features1 and is further amended after such date of enactment to provide such previously eliminated benefits1 rights1 or features to a closed class of participants1 or 7ii7 such section #dja7o77#a77;,b77iii7 or section #dja7;a77#bf71 the plan was amended before the date of the enactment of this ,act to cease all benefit accruals1 and is further amended after such date of enactment to provide benefit accruals to a closed class of participants4 ,any such section shall only apply if the plan otherwise meets the requirements of such section and in applying such section1 the date the class of participants is closed shall be the effective date of the later amendment4 ,g ,estate1 gift1 and generation-skipping transfer taxes #afja4 ,increase in credit against estate1 gift1 and generation-skipping transfer tax 7a7 ,in general ,section #bjaj7;c77#c7 is amended by striking #e1jjj1jjj and inserting #aj1jjj1jjj4 7b7 ,effective date ,the amendments made by this section shall apply to estates of decedents dying1 generation-skipping transfers1 and gifts made1 after ,december #ca1 #bjag4 #afjb4 ,repeal of estate and generation-skipping transfer taxes 7a7 ,estate tax repeal 7#a7 ,in general ,subchapter ,c of chapter #aa is amended by adding at the end the following new section3 #bbaj4 ,termination 7a7 ,in general ,except as provided in subsection 7b71 this chapter shall not apply to the estates of decedents dying after ,december #ca1 #bjbd4 7b7 ,certain ,distributions ,from ,qualified ,domestic ,trusts ,in applying section #bjef;,a with respect to the surviving spouse of a decedent dying on or before ,december #ca1 #bjbd-- 7#a7 section #bjef;,a7b77#a77;,a7 shall not apply to distributions made after the #aj-year period beginning on such date1 and 7#b7 section #bjef;,a7b77#a77;,b7 shall not apply after such date4 4 7#b7 ,conforming amendments ,section #ajad7;b7 is amended-- 7,a7 in paragraph 7#f71 by striking was includible in determining and all that follows through the end and inserting was includible 7or would have been includible without regard to section #bbaj7 in determining the value of the decedent's gross estate under chapter #aa of subtitle ,b 1 7,b7 in paragraph 7#i71 by striking required to be included through ,code of #aici and inserting required to be included 7or would have been required to be included without regard to section #bbaj7 in determining the value of the decedent's gross estate under chapter #aa of subtitle ,b1 and 7,c7 in paragraph 7#aj71 by striking ,property includible in the gross estate and inserting ,property includible 7or which would have been includible without regard to section #bbaj7 in the gross estate4 7#c7 ,clerical amendment ,the table of sections for subchapter ,c of chapter #aa is amended by adding at the end the following new item3 ,sec4 #bbaj4 ,termination4 4 7b7 ,generation-skipping transfer tax repeal 7#a7 ,in general ,subchapter ,g of chapter #ac of subtitle ,b of such ,code is amended by adding at the end the following new section3 #bffd4 ,termination ,this chapter shall not apply to generation-skipping transfers after ,december #ca1 #bjbd4 4 7#b7 ,clerical amendment ,the table of sections for subchapter ,g of chapter #ac of such ,code is amended by adding at the end the following new item3 ,sec4 #bffd4 ,termination4 4 7c7 ,conforming amendments related to gift tax 7#a7 ,computation of gift tax ,section #bejb is amended by adding at the end the following new subsection3 7d7 ,gifts made after #bjbd 7#a7 ,in general ,in the case of a gift made after ,december #ca1 #bjbd1 subsection 7a7 shall be applied by substituting subsection 7d77#b7 for section #bjja7;c7 and such subsection for such section4 7#b7 ,rate schedule ,if the amount with respect to which the tentative tax to be computed is3,the tentative tax is3 ,not over #aj1jjjah of such amount4 ,over #aj1jjj but not over #bj1jjja1hjj1 plus #bj of the excess over #aj1jjj4 ,over #bj1jjj but not over #dj1jjjc1hjj1 plus #bb of the excess over #bj1jjj4 ,over #dj1jjj but not over #fj1jjjh1bjj1 plus #bd of the excess over #dj1jjj4 ,over #fj1jjj but not over #hj1jjjac1jjj1 plus #bf of the excess over #fj1jjj4 ,over #hj1jjj but not over #ajj1jjjah1bjj1 plus #bh of the excess over #hj1jjj4 ,over #ajj1jjj but not over #aej1jjjbc1hjj1 plus #cj of the excess over #ajj1jjj4 ,over #aej1jjj but not over #bej1jjjch1hjj1 plus #cb of the excess of #aej1jjj4 ,over #bej1jjj but not over #ejj1jjjgj1hjj1 plus #cd of the excess over #bej1jjj4 ,over #ejj1jjjaee1hjj1 plus #ce of the excess of #ejj1jjj4 4 7#b7 ,lifetime gift exemption ,section #beje is amended by adding at the end the following new subsection3 7d7 ,gifts made after #bjbd 7#a7 ,in general ,in the case of a gift made after ,december #ca1 #bjbd1 subsection 7a77#a7 shall be applied by substituting the amount of the tentative tax which would be determined under the rate schedule set forth in section #bejb7;a77#b7 if the amount with respect to which such tentative tax is to be computed were #aj1jjj1jjj for the applicable credit amount in effect under section #bjaj7;c7 which would apply if the donor died as of the end of the calendar year4 7#b7 ,inflation adjustment 7,a7 ,in general ,in the case of any calendar year after #bjbd1 the dollar amount in subsection 7a77#a7 7after application of this subsection7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 of such calendar year by substituting calendar year #bjaa for calendar year #bjaf in clause 7ii7 thereof4 7,b7 ,rounding ,if any amount as adjusted under paragraph 7#a7 is not a multiple of #aj1jjj1 such amount shall be rounded to the nearest multiple of #aj1jjj4 4 7#c7 ,other conforming amendments related to gift tax ,section #bhja is amended by adding at the end the following new subsection3 7g7 ,gifts received after #bjbd ,in the case of a gift received after ,december #ca1 #bjbd1 subsection 7a77#a7 shall be applied by substituting section #bejb7;a77#b7 for section #bjja7;c7 as in effect on the date of such receipt4 4 7d7 ,effective date ,the amendments made by this section shall apply to estates of decedents dying1 generation-skipping transfers1 and gifts made1 after ,december #ca1 #bjbd4 ,,ii ,alternative ,minimum ,tax ,repeal #bjja4 ,repeal of alternative minimum tax 7a7 ,in general ,subchapter ,a of chapter #a is amended by striking part ,,vi 7and by striking the item relating to such part in the table of parts for subchapter ,a74 7b7 ,credit for prior year minimum tax liability 7#a7 ,limitation ,subsection 7c7 of section #ec is amended to read as follows3 7c7 ,limitation ,the credit allowable under subsection 7a7 shall not exceed the regular tax liability of the taxpayer reduced by the sum of the credits allowed under subparts ,a1 ,b1 and ,d4 4 7#b7 ,credits treated as refundable ,section #ec is amended by adding at the end the following new subsection3 7e7 ,portion of credit treated as refundable 7#a7 ,in general ,in the case of any taxable year beginning in #bjai1 #bjbj1 #bjba1 or #bjbb1 the limitation under subsection 7c7 shall be increased by the ,,amt refundable credit amount for such year4 7#b7 ,,amt refundable credit amount ,for purposes of paragraph 7#a71 the ,,amt refundable credit amount is an amount equal to #ej percent 7#ajj percent in the case of a taxable year beginning in #bjbb7 of the excess 7if any7 of-- 7,a7 the minimum tax credit determined under subsection 7b7 for the taxable year1 over 7,b7 the minimum tax credit allowed under subsection 7a7 for such year 7before the application of this subsection for such year74 7#c7 ,credit refundable ,for purposes of this title 7other than this section71 the credit allowed by reason of this subsection shall be treated as a credit allowed under subpart ,c 7and not this subpart74 7#d7 ,short taxable years ,in the case of any taxable year of less than #cfe days1 the ,,amt refundable credit amount determined under paragraph 7#b7 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 #cfe4 4 7#c7 ,treatment of references ,section #ec7;d7 is amended by adding at the end the following new paragraph3 7#c7 ,,amt term references ,any references in this subsection to section #ee1 #ef1 or #eg shall be treated as a reference to such section as in effect before its repeal by the ,tax ,cuts and ,jobs ,act4 4 7c7 ,conforming amendments related to ,,amt repeal 7#a7 ,section #b7;d7 is amended by striking sections #a and #ee and inserting section #a4 7#b7 ,section #e7;a7 is amended by striking paragraph 7#d74 7#c7 ,section #aa7;d7 is amended by striking the taxes imposed by subsection 7a7 and section #ee and inserting the tax imposed by subsection 7a74 7#d7 ,section #ab is amended by striking paragraph 7#g74 7#e7 ,section #bf7;a7 is amended to read as follows3 7a7 ,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 year4 4 7#f7 ,section #bf7;b77#b7 is amended by striking subparagraph 7,a74 7#g7 ,section #bf is amended by striking subsection 7c74 7#h7 ,section #ch7;c7 is amended-- 7,a7 by striking paragraphs 7#a7 through 7#e71 7,b7 by redesignating paragraph 7#f7 as paragraph 7#b71 7,c7 by inserting before paragraph 7#b7 7as so redesignated7 the following new paragraph3 7#a7 ,in general ,the credit allowed under subsection 7a7 for any taxable year shall not exceed the excess 7if any7 of-- 7,a7 the sum of-- 7i7 so much of the regular tax liability as does not exceed #be1jjj1 plus 7ii7 #ge percent of so much of the regular tax liability as exceeds #be1jjj1 over 7,b7 the sum of the credits allowable under subparts ,a and ,b of this part4 1 and 7,d7 by striking subparagraph 7,b7 of paragraph 7#a7 each place it appears in paragraph 7#b7 7as so redesignated7 and inserting clauses 7i7 and 7ii7 of paragraph 7#a77;,a74 7#i7 ,section #ci7;a7 is amended-- 7,a7 by striking or the eligible small business credits in paragraph 7#c77;,a71 and 7,b7 by striking paragraph 7#d74 7#aj7 ,section #de;,d7g77#d77;,b7 is amended by striking or for purposes of section #ee4 7#aa7 ,section #ed7;c77#a7 is amended to read as follows3 7#a7 regular tax liability 7as defined in section #bf7;b771 over 4 7#ab7 ,section #ed;,a7c77#a77;,a7 is amended to read as follows3 7,a7 regular tax liability 7as defined in section #bf7;b771 over 4 7#ac7 ,section #adh7;b77#c7 is amended to read as follows3 7#c7 ,tax-exempt bonds not treated as investment property ,the term investment property does not include any tax-exempt bond4 4 7#ad7 ,section #afh7k77#b7 is amended by striking subparagraph 7,g74 7#ae7 ,section #afh7k7 is amended by striking paragraph 7#d74 7#af7 ,section #afh7k77#e7 is amended by striking subparagraph 7,e74 7#ag7 ,section #afh7m77#b77;,b77i7 is amended by striking 7determined without regard to paragraph 7#d7 thereof74 7#ah7 ,section #afh7m77#b7 is amended by striking subparagraph 7,d74 7#ai7 ,section #agc is amended by striking subsection 7b74 7#bj7 ,section #bfc7;c7 is amended by striking section #ei7;e7 or #bia and inserting section #bia4 7#ba7 ,section #bfc;,a7c7 is amended by striking paragraph 7#f7 and by redesignating paragraph 7#g7 7as amended7 as paragraph 7#f74 7#bb7 ,section #chb7l7 is amended by striking paragraph 7#g7 and by redesignating paragraph 7#h7 as paragraph 7#g74 7#bc7 ,section #ddc is amended by striking subsection 7d7 and by redesignating subsection 7e7 as subsection 7d74 7#bd7 ,section #faf is amended by striking subsection 7e74 7#be7 ,section #fag is amended by striking subsection 7i74 7#bf7 ,section #fda7;c7 is amended-- 7,a7 in paragraph 7#b7 by striking subparagraph 7,b7 and by redesignating subparagraphs 7,c7 and 7,d7 as subparagraphs 7,b7 and 7,c71 respectively1 and 7,b7 in paragraph 7#c71 by striking paragraph 7#b77;,c7 and inserting paragraph 7#b77;,b74 7#bg7 ,subsections 7b7 and 7c7 of section #fff are each amended by striking 7other than the tax imposed by section #ee74 7#bh7 ,section #hdh is amended by striking subsection 7i74 7#bi7 ,section #hfj;,e7a7 is amended by striking paragraph 7#d74 7#cj7 ,section #hga7;b77#a7 is amended by striking or #ee4 7#ca7 ,section #hhb7;a77#a7 is amended by striking #ee14 7#cb7 ,section #hig7;a7 is amended to read as follows3 7a7 ,treatment as effectively connected with united states trade or business ,for purposes of this title1 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-- 7#a7 in the case of a nonresident alien individual1 under section #hga7;b77#a71 or 7#b7 in the case of a foreign corporation1 under section #hhb7;a77#a71 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 business4 4 7#cc7 ,section #ijd7k7 is amended to read as follows3 7k7 ,cross reference ,for increase of limitation under subsection 7a7 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 corporation1 see section #ifj7;b74 4 7#cd7 ,section #iaa7;f7 is amended to read as follows3 7f7 ,determination of tax liability 7#a7 ,in general ,if1 for any taxable year1 any amount is excluded from gross income of a taxpayer under subsection 7a71 then1 notwithstanding section #a1 if such taxpayer has taxable income for such taxable year1 the tax imposed by section #a for such taxable year shall be equal to the excess 7if any7 of-- 7,a7 the tax which would be imposed by section #a for such taxable year if the taxpayer's taxable income were increased by the amount excluded under subsection 7a7 for such taxable year1 over 7,b7 the tax which would be imposed by section #a for such taxable year if the taxpayer's taxable income were equal to the amount excluded under subsection 7a7 for such taxable year4 ,for purposes of this paragraph1 the amount excluded under subsection 7a7 shall be reduced by the aggregate amount of any deductions or exclusions disallowed under subsection 7d77#f7 with respect to such excluded amount4 7#b7 ,treatment of capital gain excess 7,a7 ,in general ,in applying section #a7;h7 for purposes of determining the tax under paragraph 7#a77;,a7 for any taxable year in which1 without regard to this subsection1 the taxpayer's net capital gain exceeds taxable income 7hereafter in this subparagraph referred to as the capital gain excess7-- 7i7 the taxpayer's net capital gain 7determined without regard to section #a7;h77#aa77 shall be reduced 7but not below zero7 by such capital gain excess1 7ii7 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 7determined without regard to section #a7;h77#aa7 and the reduction under clause 7i771 and 7iii7 adjusted net capital gain1 unrecaptured section #abej gain1 and #bh-percent rate gain shall each be determined after increasing the amount described in section #a7;h77#d77;,b7 by such capital gain excess4 7,b7 ,definitions ,terms used in this paragraph which are also used in section #a7;h7 shall have the respective meanings given such terms by section #a7;h74 4 7#ce7 ,section #ifb7;a77#a7 is amended-- 7,a7 by striking sections #a and #ee and inserting section #a1 and 7,b7 by striking sections #aa and #ee and inserting section #aa4 7#cf7 ,section #ajaf7;a7 is amended by striking paragraph 7#bj74 7#cg7 ,section #abjb7;a77#d7 is amended by inserting and at the end of subparagraph 7,a71 by striking 1 and and inserting a period at the end of subparagraph 7,b71 and by striking subparagraph 7,c74 7#ch7 ,section #acgd7;b77#c77;,b7 is amended by striking the last sentence thereof4 7#ci7 ,section #aefa7;a7 is amended-- 7,a7 by inserting and at the end of paragraph 7#a71 by striking 1 and at the end of paragraph 7#b7 and inserting a period1 and by striking paragraph 7#c71 and 7,b7 by striking the last sentence4 7#dj7 ,section #fjae7;d77#b77;,b7 is amended by striking or #ee4 7#da7 ,section #fbaa7;b77#d77;,a7 is amended by striking1 #afh7k77#d74 7#db7 ,section #fdbe7;c77#a77;,a7 is amended to read as follows3 7,a7 the tax imposed under section #aa or subchapter ,l of chapter #a1 whichever is applicable1 over 4 7#dc7 ,section #ffed7;d77#b7 is amended-- 7,a7 in clause 7i7 of subparagraph 7,b71 by striking 1 alternative minimum taxable income11 and 7,b7 in clause 7i7 of subparagraph 7,c71 by striking 1 alternative minimum taxable income14 7#dd7 ,section #ffee7;e77#b77;,b77i7 is amended by striking ,the taxable income and alternative minimum taxable income shall and inserting ,taxable income shall4 7#de7 ,section #ffee7;g77#a77;,a7 is amended by adding plus at the end of clause 7i71 by striking clause 7ii71 and by redesignating clause 7iii7 as clause 7ii74 7#df7 ,section #fffb7;e77#c77;,c7 is amended by striking the regular tax 7as defined in section #ee7;c77 and inserting the regular tax liability 7as defined in section #bf7;b774 7d7 ,effective dates 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7#b7 ,prior elections with respect to certain tax preferences ,so much of the amendment made by subsection 7a7 as relates to the repeal of section #ei7;e7 of the ,internal ,revenue ,code of #aihf shall apply to amounts paid or incurred after ,december #ca1 #bjag4 7#c7 ,treatment of net operating loss carrybacks ,for purposes of section #ef7;d7 of the ,internal ,revenue ,code of #aihf 7as in effect before its repeal71 the amount of any net operating loss which may be carried back from a taxable year beginning after ,december #ca1 #bjag1 to taxable years beginning before ,january #a1 #bjah1 shall be determined without regard to any adjustments under section #ef7;d77#b77;,a7 of such ,code 7as so in effect74 ,,iii ,business tax reform ,a ,tax rates #cjja4 ,reduction in corporate tax rate 7a7 ,in general ,section #aa7;b7 is amended to read as follows3 7b7 ,amount of tax 7#a7 ,in general ,except as otherwise provided in this subsection1 the amount of the tax imposed by subsection 7a7 shall be #bj percent of taxable income4 7#b7 ,special rule for personal service corporations 7,a7 ,in general ,in the case of a personal service corporation 7as defined in section #ddh7;d77#b771 the amount of the tax imposed by subsection 7a7 shall be #be percent of taxable income4 7,b7 ,references to corporate rate ,any reference to the rate imposed under this section or to the highest rate in effect under this section 7or any similar reference7 shall be determined without regard to the rate imposed with respect to personal service corporations 7as so defined74 4 7b7 ,conforming amendments 7#a7 7,a7 ,part ,i of subchapter ,p of chapter #a is amended by striking section #abja 7and by striking the item relating to such section in the table of sections for such part74 7,b7 ,section #ab is amended by striking paragraph 7#d74 7,c7 ,section #ebg7;b7 is amended-- 7i7 by striking paragraph 7#b71 and 7ii7 by striking all that precedes is hereby imposed and inserting3 7b7 ,tax imposed ,a tax 4 7,d7 ,section #eid7;a7 is amended by striking taxes imposed by section #aa or #abja7;a7 and inserting tax imposed by section #aa4 7,e7 ,section #fia7;c77#d7 is amended by striking #abja14 7,f7 ,section #hja7;a7 is amended-- 7i7 by striking paragraph 7#b71 and 7ii7 by striking all that precedes is hereby imposed and inserting3 7a7 ,tax imposed ,a tax 4 7,g7 ,section #hca7;e7 is amended by striking paragraph 7#a7 and by redesignating paragraphs 7#b7 and 7#c7 as paragraphs 7#a7 and 7#b71 respectively4 7,h7 ,sections #hcb7;c77#e7 and #hcd7;b77#a77;,d7 are each amended by striking sec4 #abja and following14 7,i7 ,section #heb7;b77#c77;,a7 is amended by striking section #abja7;a7 and inserting section #aa7;b77#a74 7,j7 ,section #heg7;b77#c7 is amended-- 7i7 by striking subparagraph 7,a7 and redesignating subparagraphs 7,b7 through 7,f7 as subparagraphs 7,a7 through 7,e71 respectively1 7ii7 in subparagraph 7,c71 as so redesignated-- 7,i7 by striking subparagraph 7,a77ii7 in clause 7i7 thereof and inserting paragraph 7#a71 7,,ii7 by striking the tax imposed by subparagraph 7,a77ii7 in clauses 7ii7 and 7iv7 thereof and inserting the tax imposed by paragraph 7#a7 on undistributed capital gain1 7iii7 in subparagraph 7,e71 as so redesignated1 by striking subparagraph 7,b7 or 7,d7 and inserting subparagraph 7,a7 or 7,c71 and 7iv7 by adding at the end the following new subparagraph3 7,f7 ,undistributed capital gain ,for purposes of this paragraph1 the term undistributed capital gain means the excess of the net capital gain over the deduction for dividends paid 7as defined in section #efa7 determined with reference to capital gain dividends only4 4 7,k7 ,section #hhb7;a77#a7 is amended by striking 1 or #abja7;a74 7,l7 ,section #acgd7;b7 is amended by striking paragraph 7#d74 7,m7 ,section #acha7;b7 is amended by striking taxes imposed by section #aa or #abja and inserting tax imposed by section #aa4 7,n7 ,section #ffee7;g77#a77;,a77i7 is amended by striking or #abja7;a714 7,o7 ,section #geah7;g77#f77;,a7 is amended by striking or #abja7;a74 7#b7 ,section #adde7;e77#a7 is amended by striking #ce percent 7or1 to the extent provided in regulations1 #bj percent7 and inserting #bj percent4 7#c7 ,section #adde7;e77#b7 is amended by striking #ce percent and inserting #bj percent4 7#d7 ,section #adde7;e77#f7 is amended by striking #ce percent 7or1 to the extent provided in regulations1 #bj percent7 and inserting #bj percent4 7#e7 7,a7 ,part ,i of subchapter ,b of chapter #e is amended by striking section #aeea 7and by striking the item relating to such section in the table of sections for such part74 7,b7 ,section #ab is amended by striking paragraph 7#f74 7,c7 ,section #ece7;c77#e7 is amended to read as follows3 7#e7 ,cross reference ,for limitation on credit provided in paragraph 7#b7 or 7#c7 in the case of certain controlled corporations1 see section #aefa4 4 7#f7 7,a7 ,section #aefa1 as amended by the preceding provisions of this ,act1 is amended to read as follows3 #aefa4 ,limitation on accumulated earnings credit in the case of certain controlled corporations 7a7 ,in general ,the component members of a controlled group of corporations on a ,december #ca shall1 for their taxable years which include such ,december #ca1 be limited for purposes of this subtitle to one #bej1jjj 7#aej1jjj if any component member is a corporation described in section #ece7;c77#b77;,b77 amount for purposes of computing the accumulated earnings credit under section #ece7;c77#b7 and 7#c74 ,such amount shall be divided equally among the component members of such group on such ,december #ca unless the ,secretary prescribes regulations permitting an unequal allocation of such amount4 7b7 ,certain short taxable years ,if a corporation has a short taxable year which does not include a ,december #ca and is a component member of a controlled group of corporations with respect to such taxable year1 then for purposes of this subtitle1 the amount to be used in computing the accumulated earnings credit under section #ece7;c77#b7 and 7#c7 of such corporation for such taxable year shall be the amount specified in subsection 7a7 with respect to such group1 divided by the number of corporations which are component members of such group on the last day of such taxable year4 ,for purposes of the preceding sentence1 section #aefc7;b7 shall be applied as if such last day were substituted for ,december #ca4 4 7,b7 ,the table of sections for part ,,ii of subchapter ,b of chapter #e is amended by striking the item relating to section #aefa and inserting the following new item3 ,sec4 #aefa4 ,limitation on accumulated earnings credit in the case of certain controlled corporations4 4 7#g7 ,section #geah7;g77#f77;,a7 is amended-- 7,a7 by striking ,with respect to the portion and inserting ,in the case of a taxpayer other than a corporation1 with respect to the portion1 and 7,b7 by striking 7#cd percent in the case of a corporation74 7c7 ,reduction in dividend received deductions to reflect lower corporate income tax rates 7#a7 ,dividends received by corporations 7,a7 ,in general ,section #bdc7;a77#a7 is amended by striking #gj percent and inserting #ej percent4 7,b7 ,dividends from #bj-percent owned corporations ,section #bdc7;c77#a7 is amended-- 7i7 by striking #hj percent and inserting #fe percent1 and 7ii7 by striking #gj percent and inserting #ej percent4 7,c7 ,conforming amendment ,the heading for section #bdc7;c7 is amended by striking ,retention of #hj-percent dividend received deduction and inserting ,increased percentage4 7#b7 ,dividends received from ,,fsc ,section #bde7;c77#a77;,b7 is amended-- 7,a7 by striking #gj percent and inserting #ej percent1 and 7,b7 by striking #hj percent and inserting #fe percent4 7#c7 ,limitation on aggregate amount of deductions ,section #bdf7;b77#c7 is amended-- 7,a7 by striking #hj percent in subparagraph 7,a7 and inserting #fe percent1 and 7,b7 by striking #gj percent in subparagraph 7,b7 and inserting #ej percent4 7#d7 ,reduction in deduction where portfolio stock is debt-financed ,section #bdf;,a7a77#a7 is amended-- 7,a7 by striking #gj percent and inserting #ej percent1 and 7,b7 by striking #hj percent and inserting #fe percent4 7#e7 ,income from sources within the ,united ,states ,section #hfa7;a77#b7 is amended-- 7,a7 by striking #ajj_/gjth and inserting #ajj_/ejth in subparagraph 7,b71 and 7,b7 in the flush sentence at the end-- 7i7 by striking #ajj_/hjth and inserting #ajj_/feth1 and 7ii7 by striking #ajj_/gjth and inserting #ajj_/ejth4 7d7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7#b7 ,certain conforming amendments ,the amendments made by paragraphs 7#b71 7#c71 and 7#d7 of subsection 7b7 shall apply to distributions after ,december #ca1 #bjag4 7e7 ,normalization requirements 7#a7 ,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 #afg or #afh of the ,internal ,revenue ,code of #aihf if the taxpayer1 in computing its cost of service for ratemaking purposes and reflecting operating results in its regulated books of account1 reduces the excess tax reserve more rapidly or to a greater extent than such reserve would be reduced under the average rate assumption method4 7#b7 ,alternative ,method for ,certain ,taxpayers ,if1 as of the first day of the taxable year that includes the date of enactment of this ,act-- 7,a7 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 method1 and 7,b7 the taxpayer's books and underlying records did not contain the vintage account data necessary to apply the average rate assumption method1 the taxpayer will be treated as using a normalization method of accounting if1 with respect to such jurisdiction1 the taxpayer uses the alternative method for public utility property that is subject to the regulatory authority of that jurisdiction4 7#c7 ,definitions ,for purposes of this subsection-- 7,a7 ,excess tax reserve ,the term excess tax reserve means the excess of-- 7i7 the reserve for deferred taxes 7as described in section #afh7;i77#i77;,a77ii7 of the ,internal ,revenue ,code of #aihf as in effect on the day before the date of the enactment of this ,act71 over 7ii7 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 periods4 7,b7 ,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 taxes4 ,under such method1 if timing differences for the property reverse1 the amount of the adjustment to the reserve for the deferred taxes is calculated by multiplying-- 7i7 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 question1 by 7ii7 the amount of the timing differences which reverse during such period4 7,c7 ,alternative method ,the alternative method is the method in which the taxpayer-- 7i7 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 purposes1 and 7ii7 reduces the excess tax reserve ratably over the remaining regulatory life of the property4 7#d7 ,tax increased for normalization violation ,if1 for any taxable year ending after the date of the enactment of this ,act1 the taxpayer does not use a normalization method of accounting1 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 accounting4 ,b ,cost recovery #caja4 ,increased expensing 7a7 #ajj percent expensing ,section #afh7k77#a77;,a7 is amended by striking #ej percent and inserting #ajj percent4 7b7 ,extension through ,january #a1 #bjbc ,section #afh7k77#b7 is amended-- 7#a7 in subparagraph 7,a77iii71 by striking ,january #a1 #bjbj and inserting ,january #a1 #bjbc1 7#b7 in subparagraph 7,b77i77,,ii71 by striking ,january #a1 #bjba and inserting ,january #a1 #bjbd1 7#c7 in subparagraph 7,b77i77,,iii71 by striking ,january #a1 #bjbj and inserting ,january #a1 #bjbc1 7#d7 in subparagraph 7,b77ii71 by striking ,january #a1 #bjbj in each place it appears and inserting ,january #a1 #bjbc1 and 7#e7 in subparagraph 7,e77i71 by striking ,january #a1 #bjbj and replacing it with ,january #a1 #bjbc4 7c7 ,application to used property 7#a7 ,in general ,section #afh7k77#b77;,a77ii7 is amended to read as follows3 7ii7 the original use of which begins with the taxpayer or the acquisition of which by the taxpayer meets the requirements of clause 7ii7 of subparagraph 7,e71 and 4 7#b7 ,acquisition requirements ,section #afh7k77#b77;,e77ii7 is amended to read as follows3 7ii7 ,acquisition requirements ,an acquisition of property meets the requirements of this clause if-- 7,i7 such property was not used by the taxpayer at any time prior to such acquisition1 and 7,,ii7 the acquisition of such property meets the requirements of paragraphs 7#b77;,a71 7#b77;,b71 7#b77;,c71 and 7#c7 of section #agi7;d74 1 7#c7 ,anti-abuse rules ,section #afh7k77#b77;,e7 is further amended by amending clause 7iii77,i7 to read as follows3 7,i7 property is used by a lessor of such property and such use is the lessor's first use of such property1 4 7d7 ,exception for certain trades and businesses not subject to limitation on interest expense ,section #afh7k77#b71 as amended by section #bjja1 is amended by inserting after subparagraph 7,f7 the following new subparagraph3 7,g7 ,exception for property of certain businesses not subject to limitation on interest expense ,the term qualified property shall not include any property used in-- 7i7 a trade or business described in subparagraph 7,b7 or 7,c7 of section #afc7;j77#g71 or 7ii7 a trade or business that has had floor plan financing indebtedness 7as defined in paragraph 7#i7 of section #afc7;j771 if the floor plan financing interest related to such indebtedness was taken into account under paragraph 7#a77;,c7 of such section4 4 7e7 ,coordination with section #bhj;,f ,section #afh7k77#b77;,f7 is amended-- 7#a7 by striking #h1jjj in clauses 7i7 and 7iii7 and inserting #af1jjj1 and 7#b7 in clause 7iii7-- 7,a7 by striking placed in service by the taxpayer after ,december #ca1 #bjag and inserting acquired by the taxpayer before ,september #bh1 #bjag1 and placed in service by the taxpayer after ,september #bg1 #bjag1 and 7,b7 by redesignating subclauses 7,i7 and 7,,ii7 as subclauses 7,,ii7 and 7,,iii7 respectively1 and inserting before clause 7,,ii71 as so redesignated1 the following new subclause3 7,i7 in the case of a passenger automobile placed in service before ,january #a1 #bjah1 #h1jjj1 4 7f7 ,conforming amendments 7#a7 ,section #afh7k77#b77;,b77i77,,iii71 as amended1 is amended by inserting binding before contract4 7#b7 ,section #afh7k77#e7 is amended by-- 7,a7 by striking ,january #a1 #bjbj in subparagraph 7,a7 and inserting ,january #a1 #bjbc1 7,b7 by striking #ej percent in subparagraph 7,a77i7 and inserting #ajj percent1 and 7,c7 by striking subparagraph 7,f74 7#c7 ,section #afh7k77#f7 is amended to read as follows3 7#f7 ,phase ,down ,in the case of qualified property acquired by the taxpayer before ,september #bh1 #bjag1 and placed in service by the taxpayer after ,september #bg1 #bjag1 paragraph 7#a77;,a7 shall be applied by substituting for #ajj percent-- 7,a7 #ej percent in the case of-- 7i7 property placed in service before ,january #a1 #bjah1 and 7ii7 property described in subparagraph 7,b7 or 7,c7 of paragraph 7#b7 which is placed in service in #bjah1 7,b7 #dj percent in the case of-- 7i7 property placed in service in #bjah 7other than property described in subparagraph 7,b7 or 7,c7 of paragraph 7#b771 and 7ii7 property described in subparagraph 7,b7 or 7,c7 of paragraph 7#b7 which is placed in service in #bjai1 and 7,c7 #cj percent in the case of-- 7i7 property placed in service in #bjai 7other than property described in subparagraph 7,b7 or 7,c7 of paragraph 7#b771 and 7ii7 property described in subparagraph 7,b7 or 7,c7 of paragraph 7#b7 which is placed in service in #bjbj4 4 7#d7 ,the heading of section #afh7k7 is amended by striking ,special allowance for certain property acquired after ,december #ca1 #bjjg1 and before ,january #a1 #bjbj and inserting ,full expensing of certain property4 7#e7 ,section #dfj7;c77#f77;,b77ii7 is amended by striking ,january #a1 #bjbj 7,january #a1 #bjba in the case of property described in section #afh7k77#b77;,b77 and inserting ,january #a1 #bjbc 7,january #a1 #bjbd in the case of property described in section #afh7k77#b77;,b774 7g7 ,effective date 7#a7 ,in general ,except at provided by paragraph 7#b71 the amendments made by this section shall apply to property which-- 7,a7 is acquired after ,september #bg1 #bjag1 and 7,b7 is placed in service after such date4 ,for purposes of the preceding sentence1 property shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition4 7#b7 ,specified plants ,the amendments made by subsection 7f77#b7 shall apply to specified plants planted or grafted after ,september #bg1 #bjag4 7#c7 ,transition rule ,in the case of any taxpayer's first taxable year ending after ,september #bg1 #bjag1 the taxpayer may elect 7at such time and in such form and manner as the ,secretary of the ,treasury1 or his designee1 may provide7 to apply section #afh of the ,internal ,revenue ,code of #aihf without regard to the amendments made by this section4 7#d7 ,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 #bh1 #bjag1 and ending on ,december #ca1 #bjag1 the amount of any net operating loss for such taxable year which may be treated as a net operating loss carryback 7including any such carryback attributable to any specified liability loss under section #agb7;b77#a77;,c71 any corporate equity reduction interest loss under section #agb7;b77#a77;,d71 any eligible loss under section #agb7;b77#a77;,e71 and any farming loss under section #agb7;b77#a77;,f77 shall be determined without regard to the amendments made by this section4 ,for purposes of this paragraph1 terms which are used in section #agb of the ,internal ,revenue ,code of #aihf 7determined without regard to the amendments made by section #ccjb7 shall have the same meaning as when used in such section4 ,c ,small business reforms #cbja4 ,expansion of section #agi expensing 7a7 ,increased dollar limitations 7#a7 ,in general ,section #agi7;b7 is amended-- 7,a7 by inserting 7#e1jjj1jjj1 in the case of taxable years beginning before ,january #a1 #bjbc7 after #ejj1jjj in paragraph 7#a71 and 7,b7 by inserting 7#bj1jjj1jjj1 in the case of taxable years beginning before ,january #a1 #bjbc7 after #b1jjj1jjj in paragraph 7#b74 7#b7 ,inflation adjustment ,section #agi7;b77#f7 is amended to read as follows3 7#f7 ,inflation adjustment 7,a7 ,in general ,in the case of a taxable year beginning after #bjae 7#bjah in the case of the #e1jjj1jjj and #bj1jjj1jjj amounts in subsection 7b771 each dollar amount in subsection 7b7 shall be increased by an amount equal to such dollar amount multiplied by-- 7i7 in the case of the #ejj1jjj and #b1jjj1jjj amounts in subsection 7b71 the cost-of-living adjustment determined under section #a7;c77#b7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjad for calendar year #bjaf in subparagraph 7,a77ii7 thereof1 and 7ii7 in the case of the #e1jjj1jjj and #bj1jjj1jjj amounts in subsection 7b71 the cost-of-living adjustment determined under section #a7;c77#b7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjag for calendar year #bjaf in subparagraph 7,a77ii7 thereof4 7,b7 ,rounding ,the amount of any increase under subparagraph 7,a7 shall be rounded to the nearest multiple of #aj1jjj 7#ajj1jjj in the case of the #e1jjj1jjj and #bj1jjj1jjj amounts in subsection 7b774 4 7b7 ,application to qualified energy efficient heating and air-conditioning property 7#a7 ,in general ,section #agi7;f77#b7 is amended by striking and at the end of subparagraph 7,b71 by striking the period at the end of subparagraph 7,c7 and inserting 1 and1 and by adding at the end the following new subparagraph3 7,d7 qualified energy efficient heating and air-conditioning property4 4 7#b7 ,qualified energy efficient heating and air-conditioning property ,section #agi7;f7 is amended by adding at the end the following new paragraph3 7#c7 ,qualified energy efficient heating and air-conditioning property ,for purposes of this subsection-- 7,a7 ,in general ,the term qualified energy efficient heating and air-conditioning property means any section #abej property-- 7i7 with respect to which depreciation 7or amortization in lieu of depreciation7 is allowable1 7ii7 which is installed as part of a building's heating1 cooling1 ventilation1 or hot water system1 and 7iii7 which is within the scope of ,standard #ij4a-bjjg or any successor standard4 7,b7 ,standard #ij4a-bjjg ,the term ,standard #ij4a-bjjg means ,standard #ij4a-bjjg of the ,american ,society of ,heating1 ,refrigerating and ,air-,conditioning ,engineers and the ,illuminating ,engineering ,society of ,north ,america 7as in effect on the day before the date of the adoption of ,standard #ij4a-bjaj of such ,societies74 4 7c7 ,effective date 7#a7 ,increased dollar limitations ,the amendments made by subsection 7a7 shall apply to taxable years beginning after ,december #ca1 #bjag4 7#b7 ,application to qualified energy efficient heating and air-conditioning property ,the amendments made by subsection 7b7 shall apply to property acquired and placed in service after ,november #b1 #bjag4 ,for purposes of the preceding sentence1 property shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition4 #cbjb4 ,small business accounting method reform and simplification 7a7 ,modification of limitation on cash method of accounting 7#a7 ,increased limitation ,so much of section #ddh7;c7 as precedes paragraph 7#b7 is amended to read as follows3 7c7 ,gross receipts test ,for purposes of this section-- 7#a7 ,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 #c-taxable-year period ending with the taxable year which precedes such taxable year does not exceed #be1jjj1jjj4 4 7#b7 ,application of exception on annual basis ,section #ddh7;b77#c7 is amended to read as follows3 7#c7 ,entities which meet gross receipts test ,paragraphs 7#a7 and 7#b7 of subsection 7a7 shall not apply to any corporation or partnership for any taxable year if such entity 7or any predecessor7 meets the gross receipts test of subsection 7c7 for such taxable year4 4 7#c7 ,inflation adjustment ,section #ddh7;c7 is amended by adding at the end the following new paragraph3 7#d7 ,adjustment for inflation ,in the case of any taxable year beginning after ,december #ca1 #bjah1 the dollar amount in paragraph 7#a7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;c77#b7 for the calendar year in which the taxable year begins1 by substituting calendar year #bjag for calendar year #bjaf in subparagraph 7,a77ii7 thereof4 ,if any amount as increased under the preceding sentence is not a multiple of #a1jjj1jjj1 such amount shall be rounded to the nearest multiple of #a1jjj1jjj4 4 7#d7 ,coordination with section #dha ,section #ddh7;d77#g7 is amended to read as follows3 7#g7 ,coordination with section #dha ,any change in method of accounting made pursuant to this section shall be treated for purposes of section #dha as initiated by the taxpayer and made with the consent of the ,secretary4 4 7#e7 ,application of exception to corporations engaged in farming 7,a7 ,in general ,section #ddg7;c7 is amended-- 7i7 by inserting for any taxable year after not being a corporation in the matter preceding paragraph 7#a71 and 7ii7 by amending paragraph 7#b7 to read as follows3 7#b7 a corporation which meets the gross receipts test of section #ddh7;c7 for such taxable year4 4 7,b7 ,coordination with section #dha ,section #ddg7;f7 is amended to read as follows3 7f7 ,coordination with section #dha ,any change in method of accounting made pursuant to this section shall be treated for purposes of section #dha as initiated by the taxpayer and made with the consent of the ,secretary4 4 7,c7 ,conforming amendments ,section #ddg is amended-- 7i7 by striking subsections 7d71 7e71 7h71 and 7i71 and 7ii7 by redesignating subsections 7f7 and 7g7 7as amended by subparagraph 7,b77 as subsections 7d7 and 7e71 respectively4 7b7 ,exemption from ,,unicap requirements 7#a7 ,in general ,section #bfc;,a is amended by redesignating subsection 7i7 as subsection 7j7 and by inserting after subsection 7h7 the following new subsection3 7i7 ,exemption for certain small businesses 7#a7 ,in general ,in the case of any taxpayer 7other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section #ddh7;a77#c77 which meets the gross receipts test of section #ddh7;c7 for any taxable year1 this section shall not apply with respect to such taxpayer for such taxable year4 7#b7 ,application of gross receipts test to individuals1 etc ,in the case of any taxpayer which is not a corporation or a partnership1 the gross receipts test of section #ddh7;c7 shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership4 7#c7 ,coordination with section #dha ,any change in method of accounting made pursuant to this subsection shall be treated for purposes of section #dha as initiated by the taxpayer and made with the consent of the ,secretary4 4 7#b7 ,conforming amendment ,section #bfc;,a7b77#b7 is amended to read as follows3 7#b7 ,property acquired for resale ,real or personal property described in section #abba7;a77#a7 which is acquired by the taxpayer for resale4 4 7c7 ,exemption from inventories ,section #dga is amended by redesignating subsection 7c7 as subsection 7d7 and by inserting after subsection 7b7 the following new subsection3 7c7 ,exemption for certain small businesses 7#a7 ,in general ,in the case of any taxpayer 7other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section #ddh7;a77#c77 which meets the gross receipts test of section #ddh7;c7 for any taxable year-- 7,a7 subsection 7a7 shall not apply with respect to such taxpayer for such taxable year1 and 7,b7 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-- 7i7 treats inventory as non-incidental materials and supplies1 or 7ii7 conforms to such taxpayer's method of accounting reflected in an applicable financial statement of the taxpayer with respect to such taxable year or1 if the taxpayer does not have any applicable financial statement with respect to such taxable year1 the books and records of the taxpayer prepared in accordance with the taxpayer's accounting procedures4 7#b7 ,applicable financial statement ,for purposes of this subsection1 the term applicable financial statement means-- 7,a7 a financial statement which is certified as being prepared in accordance with generally accepted accounting principles and which is-- 7i7 a #aj-,k 7or successor form71 or annual statement to shareholders1 required to be filed by the taxpayer with the ,united ,states ,securities and ,exchange ,commission1 7ii7 an audited financial statement of the taxpayer which is used for-- 7,i7 credit purposes1 7,,ii7 reporting to shareholders1 partners1 or other proprietors1 or to beneficiaries1 or 7,,iii7 any other substantial nontax purpose1 but only if there is no statement of the taxpayer described in clause 7i71 or 7iii7 filed by the taxpayer with any other ,federal or ,state agency for nontax purposes1 but only if there is no statement of the taxpayer described in clause 7i7 or 7ii71 or 7,b7 a financial statement of the taxpayer which-- 7i7 is used for a purpose described in subclause 7,i71 7,,ii71 or 7,,iii7 of subparagraph 7,a77ii71 or 7ii7 filed by the taxpayer with any regulatory or governmental body 7whether domestic or foreign7 specified by the ,secretary1 but only if there is no statement of the taxpayer described in subparagraph 7,a74 7#c7 ,application of gross receipts test to individuals1 etc ,in the case of any taxpayer which is not a corporation or a partnership1 the gross receipts test of section #ddh7;c7 shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership4 7#d7 ,coordination with section #dha ,any change in method of accounting made pursuant to this subsection shall be treated for purposes of section #dha as initiated by the taxpayer and made with the consent of the ,secretary4 4 7d7 ,exemption from percentage completion for long-term contracts 7#a7 ,in general ,section #dfj7;e77#a77;,b7 is amended-- 7,a7 by inserting 7other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section #ddh7;a77#c77 after taxpayer in the matter preceding clause 7i71 and 7,b7 by amending clause 7ii7 to read as follows3 7ii7 who meets the gross receipts test of section #ddh7;c7 for the taxable year in which such contract is entered into4 4 7#b7 ,conforming amendments ,section #dfj7;e7 is amended by striking paragraphs 7#b7 and 7#c71 by redesignating paragraphs 7#d71 7#e71 and 7#f7 as paragraphs 7#c71 7#d71 and 7#e71 respectively1 and by inserting after paragraph 7#a7 the following new paragraph3 7#b7 ,rules related to gross receipts test 7,a7 ,application of gross receipts test to individuals1 etc ,for purposes of paragraph 7#a77;,b77ii71 in the case of any taxpayer which is not a corporation or a partnership1 the gross receipts test of section #ddh7;c7 shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership4 7,b7 ,coordination with section #dha ,any change in method of accounting made pursuant to paragraph 7#a77;,b77ii7 shall be treated as initiated by the taxpayer and made with the consent of the ,secretary4 ,such change shall be effected on a cut-off basis for all similarly classified contracts entered into on or after the year of change4 4 7e7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7#b7 ,preservation of suspense account rules with respect to any existing suspense accounts ,so much of the amendments made by subsection 7a77#e77;,c7 as relate to section #ddg7;i7 of the ,internal ,revenue ,code of #aihf shall not apply with respect to any suspense account established under such section before the date of the enactment of this ,act4 7#c7 ,exemption from percentage completion for long-term contracts ,the amendments made by subsection 7d7 shall apply to contracts entered into after ,december #ca1 #bjag1 in taxable years ending after such date4 #cbjc4 ,small business exception from limitation on deduction of business interest 7a7 ,in general ,section #afc7;j77#b71 as amended by section #ccja1 is amended to read as follows3 7#b7 ,exemption for certain small businesses ,in the case of any taxpayer 7other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section #ddh7;a77#c77 which meets the gross receipts test of section #ddh7;c7 for any taxable year1 paragraph 7#a7 shall not apply to such taxpayer for such taxable year4 ,in the case of any taxpayer which is not a corporation or a partnership1 the gross receipts test of section #ddh7;c7 shall be applied in the same manner as if such taxpayer were a corporation or partnership4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #cbjd4 ,modification of treatment of ,s corporation conversions to ,c corporations 7a7 ,adjustments attributable to conversion from ,s corporation to ,c corporation ,section #dha is amended by adding at the end the following new subsection3 7d7 ,adjustments attributable to conversion from ,s corporation to ,c corporation 7#a7 ,in general ,in the case of an eligible terminated ,s corporation1 any adjustment required by subsection 7a77#b7 which is attributable to such corporation's revocation described in paragraph 7#b77;,a77ii7 shall be taken into account ratably during the #f-taxable year period beginning with the year of change4 7#b7 ,eligible terminated ,s corporation ,for purposes of this subsection1 the term eligible terminated ,s corporation means any ,c corporation-- 7,a7 which-- 7i7 was an ,s corporation on the day before the date of the enactment of the ,tax ,cuts and ,jobs ,act1 and 7ii7 during the #b-year period beginning on the date of such enactment makes a revocation of its election under section #acfb7;a71 and 7,b7 the owners of the stock of which1 determined on the date such revocation is made1 are the same owners 7and in identical proportions7 as on the date of such enactment4 4 7b7 ,cash distributions following post-termination transition period from ,s corporation status ,section #acga is amended by adding at the end the following new subsection3 7f7 ,cash distributions following post-termination transition period ,in the case of a distribution of money by an eligible terminated ,s corporation 7as defined in section #dha7;d77 after the post-termination transition period1 the accumulated adjustments account shall be allocated to such distribution1 and the distribution shall be chargeable to accumulated earnings and profits1 in the same ratio as the amount of such accumulated adjustments account bears to the amount of such accumulated earnings and profits4 4 ,d ,reform of business-related exclusions1 deductions1 etc4 #ccja4 ,interest 7a7 ,in general ,section #afc7;j7 is amended to read as follows3 7j7 ,limitation on business interest 7#a7 ,in general ,in the case of any taxpayer for any taxable year1 the amount allowed as a deduction under this chapter for business interest shall not exceed the sum of-- 7,a7 the business interest income of such taxpayer for such taxable year1 7,b7 #cj percent of the adjusted taxable income of such taxpayer for such taxable year1 plus 7,c7 the floor plan financing interest of such taxpayer for such taxable year4 ,the amount determined under subparagraph 7,b7 7after any increases in such amount under paragraph 7#c77;,a77iii77 shall not be less than zero4 7#b7 ,exemption for certain small businesses ,for exemption for certain small businesses1 see the amendment made by section #cbjc of the ,tax ,cuts and ,jobs ,act4 7#c7 ,application to partnerships1 etc 7,a7 ,in general ,in the case of any partnership-- 7i7 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 partnership1 7ii7 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 partnership1 and 7iii7 the amount determined under paragraph 7#a77;,b7 with respect to each partner of such partnership shall be increased by such partner's distributive share of such partnership's excess amount4 7,b7 ,excess amount ,the term excess amount means1 with respect to any partnership1 the excess 7if any7 of-- 7i7 #cj percent of the adjusted taxable income of the partnership1 over 7ii7 the amount 7if any7 by which the business interest of the partnership1 reduced by floor plan financing interest1 exceeds the business interest income of the partnership4 7,c7 ,application to ,s corporations ,rules similar to the rules of subparagraphs 7,a7 and 7,b7 shall apply with respect to any ,s corporation and its shareholders4 7#d7 ,business interest ,for purposes of this subsection1 the term business interest means any interest paid or accrued on indebtedness properly allocable to a trade or business4 ,such term shall not include investment interest 7within the meaning of subsection 7d774 7#e7 ,business interest income ,for purposes of this subsection1 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 business4 ,such term shall not include investment income 7within the meaning of subsection 7d774 7#f7 ,adjusted taxable income ,for purposes of this subsection1 the term adjusted taxable income means the taxable income of the taxpayer-- 7,a7 computed without regard to-- 7i7 any item of income1 gain1 deduction1 or loss which is not properly allocable to a trade or business1 7ii7 any business interest or business interest income1 7iii7 the amount of any net operating loss deduction under section #agb1 and 7iv7 any deduction allowable for depreciation1 amortization1 or depletion1 and 7,b7 computed with such other adjustments as the ,secretary may provide4 7#g7 ,trade or business ,for purposes of this subsection1 the term trade or business shall not include-- 7,a7 the trade or business of performing services as an employee1 7,b7 a real property trade or business 7as such term is defined in section #dfi7;c77#g77;,c771 or 7,c7 the trade or business of the furnishing or sale of-- 7i7 electrical energy1 water1 or sewage disposal services1 7ii7 gas or steam through a local distribution system1 or 7iii7 transportation of gas or steam by pipeline1 if the rates for such furnishing or sale1 as the case may be1 have been established or approved by a ,state or political subdivision thereof1 by any agency or instrumentality of the ,united ,states1 or by a public service or public utility commission or other similar body of any ,state or political subdivision thereof4 7#h7 ,carryforward of disallowed interest ,for carryforward of interest disallowed under paragraph 7#a71 see subsection 7o74 7#i7 ,floor plan financing interest defined ,for purposes of this subsection-- 7,a7 ,in general ,the term floor plan financing interest means interest paid or accrued on floor plan financing indebtedness4 7,b7 ,floor plan financing indebtedness ,the term floor plan financing indebtedness means indebtedness-- 7i7 used to finance the acquisition of motor vehicles held for sale to retail customers1 and 7ii7 secured by the inventory so acquired4 7,c7 ,motor vehicle ,the term motor vehicle means a motor vehicle that is any of the following3 7i7 ,an automobile4 7ii7 ,a truck4 7iii7 ,a recreational vehicle4 7iv7 ,a motorcycle4 7v7 ,a boat4 7vi7 ,farm machinery or equipment4 7vii7 ,construction machinery or equipment4 4 7b7 ,carryforward of disallowed business interest ,section #afc1 after amendment by section #dcjb7;a7 and before amendment by section #dcjb7;b71 is amended by inserting after subsection 7n7 the following new subsection3 7o7 ,carryforward of disallowed business interest ,the amount of any business interest not allowed as a deduction for any taxable year by reason of subsection 7j7 shall be treated as business interest paid or accrued in the succeeding taxable year4 ,business interest paid or accrued in any taxable year 7determined without regard to the preceding sentence7 shall not be carried past the #eth taxable year following such taxable year1 determined by treating business interest as allowed as a deduction on a first-in1 first-out basis4 4 7c7 ,treatment of carryforward of disallowed business interest in certain corporate acquisitions 7#a7 ,in general ,section #cha7;c7 is amended by inserting after paragraph 7#ai7 the following new paragraph3 7#bj7 ,carryforward of disallowed interest ,the carryover of disallowed interest described in section #afc7o7 to taxable years ending after the date of distribution or transfer4 4 7#b7 ,application of limitation ,section #chb7;d7 is amended by adding at the end the following new paragraph3 7#c7 ,application to carryforward of disallowed interest ,the term pre-change loss shall include any carryover of disallowed interest described in section #afc7o7 under rules similar to the rules of paragraph 7#a74 4 7#c7 ,conforming amendment ,section #chb7k77#a7 is amended by inserting after the first sentence the following3 ,such term shall include any corporation entitled to use a carryforward of disallowed interest described in section #cha7;c77#bj74 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #ccjb4 ,modification of net operating loss deduction 7a7 ,indefinite carryforward of net operating losses ,section #agb7;b77#a77;,a77ii7 is amended by striking to each of the #bj taxable years and inserting to each taxable year4 7b7 ,repeal of net operating loss carrybacks other than #a-year carryback of eligible disaster losses 7#a7 ,in general ,section #agb7;b77#a77;,a77i7 is amended to read as follows3 7i7 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 taxpayer1 shall be a net operating loss carryback to the taxable year preceding the taxable year of such loss1 and 4 7#b7 ,conforming amendments 7,a7 ,section #agb7;b77#a7 is amended by striking subparagraphs 7,b7 through 7,f7 and inserting the following3 7,b7 ,eligible disaster loss 7i7 ,in general ,for purposes of subparagraph 7,a77i71 the term eligible disaster loss means-- 7,i7 in the case of a taxpayer which is a small business1 net operating losses attributable to federally declared disasters 7as defined by section #afe7;i77#e771 and 7,,ii7 in the case of a taxpayer engaged in the trade or business of farming1 net operating losses attributable to such federally declared disasters4 7ii7 ,small business ,for purposes of this subparagraph1 the term small business means a corporation or partnership which meets the gross receipts test of section #ddh7;c7 7determined by substituting #e1jjj1jjj for #be1jjj1jjj each place it appears therein7 for the taxable year in which the loss arose 7or1 in the case of a sole proprietorship1 which would meet such test if such proprietorship were a corporation74 7iii7 ,trade or business of farming ,for purposes of this subparagraph1 the trade or business of farming shall include the trade or business of-- 7,i7 operating a nursery or sod farm1 or 7,,ii7 the raising or harvesting of trees bearing fruit1 nuts1 or other crops1 or ornamental trees4 ,for purposes of subclause 7,,ii71 an evergreen tree which is more than #f years old at the time severed from the roots shall not be treated as an ornamental tree4 4 7,b7 ,section #agb is amended by striking subsections 7f71 7g71 and 7h74 7c7 ,limitation of net operating loss to #ij percent of taxable income 7#a7 ,in general ,section #agb7;a7 is amended to read as follows3 7a7 ,deduction allowed ,there shall be allowed as a deduction for the taxable year an amount equal to the lesser of-- 7#a7 the aggregate of the net operating loss carryovers to such year1 plus the net operating loss carrybacks to such year1 or 7#b7 #ij percent of taxable income computed without regard to the deduction allowable under this section4 ,for purposes of this subtitle1 the term net operating loss deduction means the deduction allowed by this subsection4 4 7#b7 ,coordination of limitation with carrybacks and carryovers ,section #agb7;b77#b7 is amended by striking shall be computed-- and all that follows and inserting shall-- 7,a7 be computed with the modifications specified in subsection 7d7 other than paragraphs 7#a71 7#d71 and 7#e7 thereof1 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 thereafter1 7,b7 not be considered to be less than zero1 and 7,c7 not exceed the amount determined under subsection 7a77#b7 for such prior taxable year4 4 7#c7 ,conforming amendment ,section #agb7;d77#f7 is amended by striking and at the end of subparagraph 7,a71 by striking the period at the end of subparagraph 7,b7 and inserting 2 and1 and by adding at the end the following new subparagraph3 7,c7 subsection 7a77#b7 shall be applied by substituting real estate investment trust taxable income 7as defined in section #heg7;b77#b7 but without regard to the deduction for dividends paid 7as defined in section #efa77 for taxable income4 4 7d7 ,annual increase of indefinite carryover amounts ,section #agb7;b7 is amended by redesignating paragraph 7#c7 as paragraph 7#d7 and by inserting after paragraph 7#b7 the following new paragraph3 7#c7 ,annual increase of indefinite carryover amounts ,for purposes of paragraph 7#b7-- 7,a7 the amount of any indefinite net operating loss which is carried to the next succeeding taxable year after the loss year 7within the meaning of paragraph 7#b77 shall be increased by an amount equal to-- 7i7 the amount of the loss which may be so carried over to such succeeding taxable year 7determined without regard to this paragraph71 multiplied by 7ii7 the sum of-- 7,i7 the annual ,federal short-term rate 7determined under section #abgd7;d77 for the last month ending before the beginning of such taxable year1 plus 7,,ii7 #d percentage points1 and 7,b7 the amount of any indefinite net operating loss which is carried to any succeeding taxable year 7after such next succeeding taxable year7 shall be an amount equal to-- 7i7 the excess of-- 7,i7 the amount of the loss carried to the prior taxable year 7after any increase under this paragraph with respect to such amount71 over 7,,ii7 the amount by which such loss was reduced under paragraph 7#b7 by reason of the taxable income for such prior taxable year1 multiplied by 7ii7 a percentage equal to #ajj percent plus the percentage determined under subparagraph 7,a77ii7 with respect to such succeeding taxable year4 ,for purposes of the preceding sentence1 the term indefinite net operating loss means any net operating loss arising in a taxable year beginning after ,december #ca1 #bjag4 4 7e7 ,effective date 7#a7 ,carryforwards and carrybacks ,the amendments made by subsections 7a7 and 7b7 shall apply to net operating losses arising in taxable years beginning after ,december #ca1 #bjag4 7#b7 ,net operating loss limited to #ij percent of taxable income ,the amendments made by subsection 7c7 shall apply to taxable years beginning after ,december #ca1 #bjag4 7#c7 ,annual increase in carryover amounts ,the amendments made by subsection 7d7 shall apply to amounts carried to taxable years beginning after ,december #ca1 #bjag4 7#d7 ,special rule for net disaster losses ,notwithstanding paragraph 7#a71 the amendments made by subsection 7b7 shall not apply to the portion of the net operating loss for any taxable year which is a net disaster loss to which section #ejd7;b7 of the ,disaster ,tax ,relief and ,airport and ,airway ,extension ,act of #bjag applies4 #ccjc4 ,like-kind exchanges of real property 7a7 ,in general ,section #ajca7;a77#a7 is amended by striking property each place it appears and inserting real property4 7b7 ,conforming amendments 7#a7 ,paragraph 7#b7 of section #ajca7;a7 is amended to read as follows3 7#b7 ,exception for real property held for sale ,this subsection shall not apply to any exchange of real property held primarily for sale4 4 7#b7 ,section #ajca is amended by striking subsections 7e7 and 7i74 7#c7 ,section #ajca1 as amended by paragraph 7#b71 is amended by inserting after subsection 7d7 the following new subsection3 7e7 ,application to certain partnerships ,for purposes of this section1 an interest in a partnership which has in effect a valid election under section #gfa7;a7 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 partnership4 4 7#d7 ,section #ajca7;h7 is amended to read as follows3 7h7 ,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 kind4 4 7#e7 ,the heading of section #ajca is amended by striking property and inserting real property4 7#f7 ,the table of sections for part ,,iii of subchapter ,o of chapter #a is amended by striking the item relating to section #ajca and inserting the following new item3 ,sec4 #ajca4 ,exchange of real property held for productive use or investment4 4 7c7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to exchanges completed after ,december #ca1 #bjag4 7#b7 ,transition rule ,the amendments made by this section shall not apply to any exchange if-- 7,a7 the property disposed of by the taxpayer in the exchange is disposed of on or before ,december #ca #bjag1 or 7,b7 the property received by the taxpayer in the exchange is received on or before ,december #ca1 #bjag4 #ccjd4 ,revision of treatment of contributions to capital 7a7 ,inclusion of contributions to capital ,part ,,ii of subchapter ,b of chapter #a is amended by inserting after section #ge the following new section3 #gf4 ,contributions to capital 7a7 ,in general ,gross income includes any contribution to the capital of any entity4 7b7 ,treatment of contributions in exchange for stock1 etc 7#a7 ,in general ,in the case of any contribution of money or other property to a corporation in exchange for stock of such corporation-- 7,a7 such contribution shall not be treated for purposes of subsection 7a7 as a contribution to the capital of such corporation 7and shall not be includible in the gross income of such corporation71 and 7,b7 no gain or loss shall be recognized to such corporation upon the issuance of such stock4 7#b7 ,treatment limited to value of stock ,for purposes of this subsection1 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 stock4 7#c7 ,application to entities other than corporations ,in the case of any entity other than a corporation1 rules similar to the rules of paragraphs 7#a7 and 7#b7 shall apply in the case of any contribution of money or other property to such entity in exchange for any interest in such entity4 7c7 ,treasury stock treated as stock ,any reference in this section to stock shall be treated as including a reference to treasury stock4 4 7b7 ,basis of corporation in contributed property 7#a7 ,contributions to capital ,subsection 7c7 of section #cfb is amended to read as follows3 7c7 ,contributions to capital ,if property other than money is transferred to a corporation as a contribution to the capital of such corporation 7within the meaning of section #gf7 then the basis of such property shall be the greater of-- 7#a7 the basis determined in the hands of the transferor1 increased by the amount of gain recognized to the transferor on such transfer1 or 7#b7 the amount included in gross income by such corporation under section #gf with respect to such contribution4 4 7#b7 ,contributions in exchange for stock ,paragraph 7#b7 of section #cfb7;a7 is amended by striking contribution to capital and inserting contribution in exchange for stock of such corporation 7determined under rules similar to the rules of paragraphs 7#b7 and 7#c7 of section #gf7;b774 7c7 ,conforming amendments 7#a7 ,section #ajh7;e7 is amended by striking paragraph 7#f74 7#b7 ,part ,,iii of subchapter ,b of chapter #a is amended by striking section #aah 7and by striking the item relating to such section in the table of sections for such part74 7#c7 ,the table of sections for part ,,ii of subchapter ,b of chapter #a is amended by inserting after the item relating to section #ge the following new item3 ,sec4 #gf4 ,contributions to capital4 4 7d7 ,effective date ,the amendments made by this section shall apply to contributions made1 and transactions entered into1 after the date of the enactment of this ,act4 #ccje4 ,repeal of deduction for local lobbying expenses 7a7 ,in general ,section #afb7;e7 is amended by striking paragraphs 7#b7 and 7#g7 and by redesignating paragraphs 7#c71 7#d71 7#e71 7#f71 and 7#h7 as paragraphs 7#b71 7#c71 7#d71 7#e71 and 7#f71 respectively4 7b7 ,conforming amendment ,section #fjcc7;e77#a77;,b77ii7 is amended by striking section #afb7;e77#e77;,b77ii7 and inserting section #afb7;e77#d77;,b77ii74 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjag4 #ccjf4 ,repeal of deduction for income attributable to domestic production activities 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #aii 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 ,sections #gd7;d77#b77;,b71 #hf7;b77#b77;,a71 #acg7;b77#c77;,a71 #bai7;g77#c77;,a77ii71 and #bdf7;b77#a7 are each amended by striking #aii14 7#b7 ,section #agj7;b77#b77;,d71 as amended by the preceding provisions of this ,act1 is amended by striking clause 7iv71 by redesignating clause 7v7 as clause 7iv71 and by inserting and at the end of clause 7iii74 7#c7 ,section #agb7;d7 is amended by striking paragraph 7#g74 7#d7 ,section #fac7;a7 is amended by striking and without the deduction under section #aii4 7#e7 ,section #fac;,a7d77#a7 is amended by striking subparagraph 7,b7 and by redesignating subparagraphs 7,c71 7,d71 and 7,e7 as subparagraphs 7,b71 7,c71 and 7,d71 respectively4 7#f7 ,section #adjb7;a7 is amended by adding and at the end of paragraph 7#ae7 and by striking paragraph 7#af74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #ccjg4 ,entertainment1 etc4 expenses 7a7 ,denial of deduction ,subsection 7a7 of section #bgd is amended to read as follows3 7a7 ,entertainment1 amusement1 recreation1 and other fringe benefits 7#a7 ,in general ,no deduction otherwise allowable under this chapter shall be allowed for amounts paid or incurred for any of the following items3 7,a7 ,activity ,with respect to an activity which is of a type generally considered to constitute entertainment1 amusement1 or recreation4 7,b7 ,membership dues ,with respect to membership in any club organized for business1 pleasure1 recreation or other social purposes4 7,c7 ,amenity ,with respect to a de minimis fringe 7as defined in section #acb7;e77#a77 that is primarily personal in nature and involving property or services that are not directly related to the taxpayer's trade or business4 7,d7 ,facility ,with respect to a facility or portion thereof used in connection with an activity referred to in subparagraph 7,a71 membership dues or similar amounts referred to in subparagraph 7,b71 or an amenity referred to in subparagraph 7,c74 7,e7 ,qualified transportation fringe and parking facility ,which is a qualified transportation fringe 7as defined in section #acb7;f77 or which is a parking facility used in connection with qualified parking 7as defined in section #acb7;f77#e77;,c774 7,f7 ,on-premises athletic facility ,which is an on-premises athletic facility as defined in section #acb7;j77#d77;,b74 7#b7 ,special rules ,for purposes of applying paragraph 7#a71 an activity described in section #bab shall be treated as a trade or business4 7#c7 ,regulations ,under the regulations prescribed to carry out this section1 the ,secretary shall include regulations-- 7,a7 defining entertainment1 amenities1 recreation1 amusement1 and facilities for purposes of this subsection1 7,b7 providing for the appropriate allocation of depreciation and other costs with respect to facilities used for parking or for on-premises athletic facilities1 and 7,c7 specifying arrangements a primary purpose of which is the avoidance of this subsection4 4 7b7 ,exception for certain expenses includible in income of recipient 7#a7 ,expenses treated as compensation ,paragraph 7#b7 of section #bgd7;e7 is amended to read as follows3 7#b7 ,expenses treated as compensation ,expenses for goods1 services1 and facilities1 to the extent that the expenses do not exceed the amount of the expenses which are treated by the taxpayer1 with respect to the recipient of the entertainment1 amusement1 or recreation1 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 #bd 7relating to withholding of income tax at source on wages74 4 7#b7 ,expenses includible in income of persons who are not employees ,paragraph 7#i7 of section #bgd7;e7 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 that4 7c7 ,exceptions for reimbursed expenses ,paragraph 7#c7 of section #bgd7;e7 is amended to read as follows3 7#c7 ,reimbursed expenses 7,a7 ,in general ,expenses paid or incurred by the taxpayer1 in connection with the performance by him of services for another person 7whether or not such other person is the taxpayer's employer71 under a reimbursement or other expense allowance arrangement with such other person1 but this paragraph shall apply-- 7i7 where the services are performed for an employer1 only if the employer has not treated such expenses in the manner provided in paragraph 7#b71 or 7ii7 where the services are performed for a person other than an employer1 only if the taxpayer accounts 7to the extent provided by subsection 7d77 to such person4 7,b7 ,exception ,except as provided by the ,secretary1 subparagraph 7,a7 shall not apply-- 7i7 in the case of an arrangement in which the person other than the employer is an entity described in section #afh7;h77#b77;,a71 or 7ii7 to any other arrangement designated by the ,secretary as having the effect of avoiding the limitation under subparagraph 7,a74 4 7d7 #ej percent limitation on meals and entertainment expenses ,subsection 7n7 of section #bgd is amended to read as follows3 7n7 ,limitation on certain expenses 7#a7 ,in general ,the amount allowable as a deduction under this chapter for any expense for food or beverages 7pursuant to subsection 7e77#a77 or business meals 7pursuant to subsection 7k77#a77 shall not exceed #ej percent of the amount of such expense or item which would 7but for this paragraph7 be allowable as a deduction under this chapter4 7#b7 ,exceptions ,paragraph 7#a7 shall not apply to any expense if-- 7,a7 such expense is described in paragraph 7#b71 7#c71 7#f71 7#g71 or 7#h7 of subsection 7e71 7,b7 in the case of an expense for food or beverages1 such expense is excludable from the gross income of the recipient under section #acb by reason of subsection 7e7 thereof 7relating to de minimis fringes7 or under section #aai 7relating to meals and lodging furnished for convenience of employer71 or 7,c7 in the case of an employer who pays or reimburses moving expenses of an employee1 such expenses are includible in the income of the employee under section #hb4 7#c7 ,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 7within the meaning of section #afb7;a77#b77 by an individual during1 or incident to1 the period of duty subject to the hours of service limitations of the ,department of ,transportation1 paragraph 7#a7 shall be applied by substituting #hj percent for #ej percent4 4 7e7 ,conforming amendments 7#a7 ,section #bgd7;d7 is amended-- 7,a7 by striking paragraph 7#b7 and redesignating paragraphs 7#c7 and 7#d7 as paragraphs 7#b7 and 7#c71 respectively1 and 7,b7 in the flush material following paragraph 7#c7 7as so redesignated7-- 7i7 by striking 1 entertainment1 amusement1 recreation1 or in item 7,b71 and 7ii7 by striking 7,d7 the business relationship to the taxpayer of persons entertained1 using the facility or property1 or receiving the gift and inserting 7,d7 the business relationship to the taxpayer of the person receiving the benefit4 7#b7 ,section #bgd7;e7 is amended by striking paragraph 7#d7 and redesignating paragraphs 7#e71 7#f71 7#g71 7#h71 and 7#i7 as paragraphs 7#d71 7#e71 7#f71 7#g71 and 7#h71 respectively4 7#c7 ,section #bgd7k77#b77;,a7 is amended by striking 7#d71 7#g71 7#h71 or 7#i7 and inserting 7#f71 7#g71 or 7#h74 7#d7 ,section #bgd is amended by striking subsection 7l74 7#e7 ,section #bgd7m77#a77;,b77ii7 is amended by striking 7#d71 7#g71 7#h71 or 7#i7 and inserting 7#f71 7#g71 or 7#h74 7f7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjag4 #ccjh4 ,unrelated business taxable income increased by amount of certain fringe benefit expenses for which deduction is disallowed 7a7 ,in general ,section #eab7;a7 is amended by adding at the end the following new paragraph3 7#f7 ,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 #bgd and which is paid or incurred by such organization for any qualified transportation fringe 7as defined in section #acb7;f771 any parking facility used in connection with qualified parking 7as defined in section #acb7;f77#e77;,c771 or any on-premises athletic facility 7as defined in section #acb7;j77#d77;,b774 ,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 organization4 ,the ,secretary may issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this paragraph1 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 facilities4 4 7b7 ,effective date ,the amendment made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjag4 #ccji4 ,limitation on deduction for ,,fdic premiums 7a7 ,in general ,section #afb is amended by redesignating subsection 7q7 as subsection 7r7 and by inserting after subsection 7p7 the following new subsection3 7q7 ,disallowance of ,,fdic premiums paid by certain large financial institutions 7#a7 ,in general ,no deduction shall be allowed for the applicable percentage of any ,,fdic premium paid or incurred by the taxpayer4 7#b7 ,exception for small institutions ,paragraph 7#a7 shall not apply to any taxpayer for any taxable year if the total consolidated assets of such taxpayer 7determined as of the close of such taxable year7 do not exceed #aj1jjj1jjj1jjj4 7#c7 ,applicable percentage ,for purposes of this subsection1 the term applicable percentage means1 with respect to any taxpayer for any taxable year1 the ratio 7expressed as a percentage but not greater than #ajj percent7 which-- 7,a7 the excess of-- 7i7 the total consolidated assets of such taxpayer 7determined as of the close of such taxable year71 over 7ii7 #aj1jjj1jjj1jjj1 bears to 7,b7 #dj1jjj1jjj1jjj4 7#d7 ,,fdic premiums ,for purposes of this subsection1 the term ,,fdic premium means any assessment imposed under section #g7;b7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahag7;b774 7#e7 ,total consolidated assets ,for purposes of this subsection1 the term total consolidated assets has the meaning given such term under section #afe of the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act 7#ab ,u4,s4,c4 #ecfe74 7#f7 ,aggregation rule 7,a7 ,in general ,members of an expanded affiliated group shall be treated as a single taxpayer for purposes of applying this subsection4 7,b7 ,expanded affiliated group ,for purposes of this paragraph1 the term expanded affiliated group means an affiliated group as defined in section #aejd7;a71 determined-- 7i7 by substituting more than #ej percent for at least #hj percent each place it appears1 and 7ii7 without regard to paragraphs 7#b7 and 7#c7 of section #aejd7;b74 ,a partnership or any other entity 7other than a corporation7 shall be treated as a member of an expanded affiliated group if such entity is controlled 7within the meaning of section #ied7;d77#c77 by members of such group 7including any entity treated as a member of such group by reason of this sentence74 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #ccaj4 ,repeal of rollover of publicly traded securities gain into specialized small business investment companies 7a7 ,in general ,part ,,iii of subchapter ,o of chapter #a is amended by striking section #ajdd 7and by striking the item relating to such section in the table of sections of such part74 7b7 ,conforming amendments ,section #ajaf7;a77#bc7 is amended-- 7#a7 by striking #ajdd11 and 7#b7 by striking #ajdd7;d714 7c7 ,effective date ,the amendments made by this section shall apply to sales after ,december #ca1 #bjag4 #ccaa4 ,certain self-created property not treated as a capital asset 7a7 ,patents1 etc ,section #abba7;a77#c7 is amended by inserting a patent1 invention1 model or design 7whether or not patented71 a secret formula or process1 before a copyright4 7b7 ,conforming amendment ,section #abca7;b77#a77;,c7 is amended by inserting a patent1 invention1 model or design 7whether or not patented71 a secret formula or process1 before a copyright4 7c7 ,effective date ,the amendments made by this section shall apply to dispositions after ,december #ca1 #bjag4 #ccab4 ,repeal of special rule for sale or exchange of patents 7a7 ,in general ,part ,,iv of subchapter ,p of chapter #a is amended by striking section #abce 7and by striking the item relating to such section in the table of sections of such part74 7b7 ,conforming amendments 7#a7 ,section #dhc7;d7 is amended by striking paragraph 7#d74 7#b7 ,section #ija7l77#e7 is amended by striking without regard to section #abce 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 #a year or any similar provision4 7#c7 ,section #abgd7;c77#c7 is amended by striking subparagraph 7,e7 and redesignating subparagraph 7,f7 as subparagraph 7,e74 7c7 ,effective date ,the amendments made by this section shall apply to dispositions after ,december #ca1 #bjag4 #ccac4 ,repeal of technical termination of partnerships 7a7 ,in general ,paragraph 7#a7 of section #gjh7;b7 is amended-- 7#a7 by striking 1 or at the end of subparagraph 7,a7 and all that follows and inserting a period1 and 7#b7 by striking only if-- and all that follows through no part of any business and inserting the following3 only if no part of any business4 7b7 ,effective date ,the amendments made by this section shall apply to partnership taxable years beginning after ,december #ca1 #bjag4 #ccad4 ,recharacterization of certain gains in the case of partnership profits interests held in connection with performance of investment services 7a7 ,in general ,part ,,iv of subchapter ,o of chapter #a is amended-- 7#a7 by redesignating section #ajfa as section #ajfb1 and 7#b7 by inserting after section #ajfj the following new section3 #ajfa4 ,partnership interests held in connection with performance of services 7a7 ,in general ,if one or more applicable partnership interests are held by a taxpayer at any time during the taxable year1 the excess 7if any7 of-- 7#a7 the taxpayer's net long-term capital gain with respect to such interests for such taxable year1 over 7#b7 the taxpayer's net long-term capital gain with respect to such interests for such taxable year computed by applying paragraphs 7#c7 and 7#d7 of sections #abbb by substituting #c years for #a year1 shall be treated as short-term capital gain4 7b7 ,special rule ,to the extent provided by the ,secretary1 subsection 7a7 shall not apply to income or gain attributable to any asset not held for portfolio investment on behalf of third party investors4 7c7 ,applicable partnership interest ,for purposes of this section-- 7#a7 ,in general ,except as provided in this paragraph or paragraph 7#d71 the term applicable partnership interest means any interest in a partnership which1 directly or indirectly1 is transferred to 7or is held by7 the taxpayer in connection with the performance of substantial services by the taxpayer1 or any other related person1 in any applicable trade or business4 ,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 7other than an applicable trade or business7 and only provides services to such other entity4 7#b7 ,applicable trade or business ,the term applicable trade or business means any activity conducted on a regular1 continuous1 and substantial basis which1 regardless of whether the activity is conducted in one or more entities1 consists1 in whole or in part1 of-- 7,a7 raising or returning capital1 and 7,b7 either-- 7i7 investing in 7or disposing of7 specified assets 7or identifying specified assets for such investing or disposition71 or 7ii7 developing specified assets4 7#c7 ,specified asset ,the term specified asset means securities 7as defined in section #dge7;c77#b7 without regard to the last sentence thereof71 commodities 7as defined in section #dge7;e77#b771 real estate held for rental or investment1 cash or cash equivalents1 options or derivative contracts with respect to any of the foregoing1 and an interest in a partnership to the extent of the partnership's proportionate interest in any of the foregoing4 7#d7 ,exceptions ,the term applicable partnership interest shall not include-- 7,a7 any interest in a partnership directly or indirectly held by a corporation1 or 7,b7 any capital interest in the partnership which provides the taxpayer with a right to share in partnership capital commensurate with-- 7i7 the amount of capital contributed 7determined at the time of receipt of such partnership interest71 or 7ii7 the value of such interest subject to tax under section #hc upon the receipt or vesting of such interest4 7#e7 ,third party investor ,the term third party investor means a person who-- 7,a7 holds an interest in the partnership which does not constitute property held in connection with an applicable trade or business2 and 7,b7 is not 7and has not been7 actively engaged1 and is 7and was7 not related to a person so engaged1 in 7directly or indirectly7 providing substantial services described in paragraph 7#a7 for such partnership or any applicable trade or business4 7d7 ,transfer of applicable partnership interest to related person 7#a7 ,in general ,if a taxpayer transfers any applicable partnership interest1 directly or indirectly1 to a person related to the taxpayer1 the taxpayer shall include in gross income 7as short term capital gain7 the excess 7if any7 of-- 7,a7 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 #c years as is allocable to such interest1 over 7,b7 any amount treated as short term capital gain under subsection 7a7 with respect to the transfer of such interest4 7#b7 ,related person ,for purposes of this paragraph1 a person is related to the taxpayer if-- 7,a7 the person is a member of the taxpayer's family within the meaning of section #cah7;a77#a71 or 7,b7 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 service4 7e7 ,reporting ,the ,secretary shall require such reporting 7at the time and in the manner prescribed by the ,secretary7 as is necessary to carry out the purposes of this section4 7f7 ,regulations ,the ,secretary shall issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section 4 7b7 ,coordination with section #hc ,subsection 7e7 of section #hc is amended by striking or at the end of paragraph 7#d71 by striking the period at the end of paragraph 7#e7 and inserting 1 or1 and by adding at the end the following new paragraph3 7#f7 a transfer of an applicable partnership interest to which section #ajfa applies4 4 7c7 ,clerical amendment ,the table of sections for part ,,iv of subchapter ,o of chapter #a is amended by striking the item relating to #ajfa and inserting the following new items3 ,sec4 #ajfa4 ,partnership interests held in connection with performance of services4 ,sec4 #ajfb4 ,cross references4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #ccae4 ,amortization of research and experimental expenditures 7a7 ,in general ,section #agd is amended to read as follows3 #agd4 ,amortization of research and experimental expenditures 7a7 ,in general ,in the case of a taxpayer's specified research or experimental expenditures for any taxable year-- 7#a7 except as provided in paragraph 7#b71 no deduction shall be allowed for such expenditures1 and 7#b7 the taxpayer shall-- 7,a7 charge such expenditures to capital account1 and 7,b7 be allowed an amortization deduction of such expenditures ratably over the #e-year period 7#ae-year period in the case of any specified research or experimental expenditures which are attributable to foreign research 7within the meaning of section #da7;d77#d77;,f777 beginning with the midpoint of the taxable year in which such expenditures are paid or incurred4 7b7 ,specified research or experimental expenditures ,for purposes of this section1 the term specified research or experimental expenditures means1 with respect to any taxable year1 research or experimental expenditures which are paid or incurred by the taxpayer during such taxable year in connection with the taxpayer's trade or business4 7c7 ,special rules 7#a7 ,land and other property ,this section shall not apply to any expenditure for the acquisition or improvement of land1 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 #afg 7relating to allowance for depreciation1 etc47 or section #faa 7relating to allowance for depletion72 but for purposes of this section allowances under section #afg1 and allowances under section #faa1 shall be considered as expenditures4 7#b7 ,exploration expenditures ,this section shall not apply to any expenditure paid or incurred for the purpose of ascertaining the existence1 location1 extent1 or quality of any deposit of ore or other mineral 7including oil and gas74 7#c7 ,software development ,for purposes of this section1 any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure4 7d7 ,treatment upon disposition1 retirement1 or abandonment ,if any property with respect to which specified research or experimental expenditures are paid or incurred is disposed1 retired1 or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section1 no deduction shall be allowed with respect to such expenditures on account of such disposition1 retirement1 or abandonment and such amortization deduction shall continue with respect to such expenditures4 4 7b7 ,clerical amendment ,the table of sections for part ,,vi of subchapter ,b of chapter #a is amended by striking the item relating to section #agd and inserting the following new item3 ,sec4 #agd4 ,amortization of research and experimental expenditures4 4 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after ,december #ca1 #bjbb4 #ccaf4 ,uniform treatment of expenses in contingency fee cases 7a7 ,in general ,section #afb1 as amended by the preceding provisions of this ,act1 is amended by redesignating subsection 7r7 as subsection 7s7 and by inserting after subsection 7q7 the following new subsection3 7r7 ,expenses in contingency fee cases ,no deduction shall be allowed under subsection 7a7 to a taxpayer for any expense-- 7#a7 paid or incurred in the course of the trade or business of practicing law1 and 7#b7 resulting from a case for which the taxpayer is compensated primarily on a contingent basis1 until such time as such contingency is resolved4 4 7b7 ,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 ,act4 ,e ,reform of business credits #cdja4 ,repeal of credit for clinical testing expenses for certain drugs for rare diseases or conditions 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,c 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#ab74 7#b7 ,section #bhj;,c is amended by striking subsection 7b74 7#c7 ,section #feja7m7 is amended by striking #de;,c7d77#d714 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after ,december #ca1 #bjag4 #cdjb4 ,repeal of employer-provided child care credit 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,f 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#ae74 7#b7 ,section #ajaf7;a7 is amended by striking paragraph 7#bh74 7c7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7#b7 ,basis adjustments ,the amendment made by subsection 7b77#b7 shall apply to credits determined for taxable years beginning after ,december #ca1 #bjag4 #cdjc4 ,repeal of rehabilitation credit 7a7 ,in general ,subpart ,e of part ,,iv of subchapter ,a of chapter #a is amended by striking section #dg 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #agj7;f77#ad77;,a7 is amended by inserting 7as in effect before its repeal by the ,tax ,cuts and ,jobs ,act7 after section #dg4 7#b7 ,section #agj7;h77#d7 is amended-- 7,a7 by striking 7as defined in section #dg7;c77#c77;,b77 in subparagraph 7,c77ii71 and 7,b7 by adding at the end the following new subparagraph3 7,d7 ,registered historic district ,the term registered historic district means-- 7i7 any district listed in the ,national ,register1 and 7ii7 any district-- 7,i7 which is designated under a statute of the appropriate ,state or local government1 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 district1 and 7,,ii7 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 ,register4 4 7#c7 ,section #dfi7;i77#c7 is amended by striking subparagraph 7,b74 7#d7 ,section #dfi7;i77#f77;,b7 is amended-- 7,a7 by striking in the case of-- and all that follows and inserting in the case of any credit determined under section #db for any taxable year41 and 7,b7 by striking 1 rehabilitation credit1 in the heading thereof4 7#e7 ,section #dfi7k77#a7 is amended by striking 1 or any rehabilitation credit determined under section #dg14 7c7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjag4 7#b7 ,transition rule ,in the case of qualified rehabilitation expenditures 7within the meaning of section #dg of the ,internal ,revenue ,code of #aihf as in effect before its repeal7 with respect to any building-- 7,a7 owned or leased 7as permitted by section #dg of the ,internal ,revenue ,code of #aihf as in effect before its repeal7 by the taxpayer at all times after ,december #ca1 #bjag1 and 7,b7 with respect to which the #bd-month period selected by the taxpayer under section #dg7;c77#a77;,c7 of such ,code begins not later than the end of the #ahj-;day period beginning on the date of the enactment of this ,act1 the amendments made by this section shall apply to such expenditures paid or incurred after the end of the taxable year in which the #bd-month period referred to in subparagraph 7,b7 ends4 #cdjd4 ,repeal of work opportunity tax credit 7a7 ,in general ,subpart ,f of part ,,iv of subchapter ,a of chapter #a is amended by striking section #ea 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,clerical amendment ,the heading of such subpart ,f 7and the item relating to such subpart in the table of subparts for part ,,iv of subchapter ,a of chapter #a7 are each amended by striking ,rules for ,computing ,work ,opportunity ,credit and inserting ,special ,rules4 7c7 ,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 #ca1 #bjag4 #cdje4 ,repeal of deduction for certain unused business credits 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by striking section #aif 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #cdjf4 ,termination of new markets tax credit 7a7 ,in general ,section #de;,d7f7 is amended-- 7#a7 by striking #bjai in paragraph 7#a77;,g7 and inserting #bjag1 and 7#b7 by striking #bjbd in paragraph 7#c7 and inserting #bjbb4 7b7 ,effective date ,the amendments made by this section shall apply to calendar years beginning after ,december #ca1 #bjag4 #cdjg4 ,repeal of credit for expenditures to provide access to disabled individuals 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #dd 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendment ,section #ch7;b7 is amended by striking paragraph 7#g74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #cdjh4 ,modification of credit for portion of employer social security taxes paid with respect to employee tips 7a7 ,credit determined with respect to minimum wage as in effect ,section #de;,b7b77#a77;,b7 is amended by striking as in effect on ,january #a1 #bjjg1 and4 7b7 ,information return requirement ,section #de;,b is amended by redesignating subsections 7c7 and 7d7 as subsections 7d7 and 7e71 respectively1 and by inserting after subsection 7b7 the following new subsection3 7c7 ,information return requirement 7#a7 ,in general ,no credit shall be determined under subsection 7a7 with respect to any food or beverage establishment of any taxpayer for any taxable year unless such taxpayer has1 with respect to the calendar year which ends in or with such taxable year-- 7,a7 made a report to the ,secretary showing the information described in section #fjec7;c77#a7 with respect to such food or beverage establishment1 and 7,b7 furnished written statements to each employee of such food or beverage establishment showing the information described in section #fjec7;c77#b74 7#b7 ,allocation of #aj percent of gross receipts ,for purposes of determining the information referred to in subparagraphs 7,a7 and 7,b71 section #fjec7;c77#c77;,a77i7 shall be applied by substituting #aj percent for #h percent4 ,for purposes of section #fjec7;c77#e71 any reference to section #fjec7;c77#c77;,b7 contained therein shall be treated as including a reference to this paragraph4 7#c7 ,food or beverage establishment ,for purposes of this subsection1 the term food or beverage establishment means any trade or business 7or portion thereof7 which would be a large food or beverage establishment 7as defined in section #fjec7;c77#d77 if such section were applied without regard to subparagraph 7,c7 thereof4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,f ,energy credits #ceja4 ,modifications to credit for electricity produced from certain renewable resources 7a7 ,termination of inflation adjustment ,section #de7;b77#b7 is amended-- 7#a7 by striking ,the #a4e cent amount and inserting the following3 7,a7 ,in general ,the #a4e cent amount 1 and 7#b7 by adding at the end the following new subparagraph3 7,b7 ,termination ,subparagraph 7,a7 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 subparagraph4 4 7b7 ,special rule for determination of beginning of construction ,section #de7;e7 is amended by adding at the end the following new paragraph3 7#ab7 ,special rule for determining beginning of construction ,for purposes of subsection 7d71 the construction of any facility1 modification1 improvement1 addition1 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 service4 4 7c7 ,effective dates 7#a7 ,termination of inflation adjustment ,the amendments made by subsection 7a7 shall apply to taxable years ending after the date of the enactment of this ,act4 7#b7 ,special rule for determination of beginning of construction ,the amendment made by subsection 7b7 shall apply to taxable years beginning before1 on1 or after the date of the enactment of this ,act4 #cejb4 ,modification of the energy investment tax credit 7a7 ,extension of solar energy property ,section #dh7;a77#c77;,a77ii7 is amended by striking periods ending before ,january #a1 #bjag and inserting property the construction of which begins before ,january #a1 #bjbb4 7b7 ,extension of qualified fuel cell property ,section #dh7;c77#a77;,d7 is amended by striking for any period after ,december #ca1 #bjaf and inserting the construction of which does not begin before ,january #a1 #bjbb4 7c7 ,extension of qualified microturbine property ,section #dh7;c77#b77;,d7 is amended by striking for any period after ,december #ca1 #bjaf and inserting the construction of which does not begin before ,january #a1 #bjbb4 7d7 ,extension of combined heat and power system property ,section #dh7;c77#c77;,a77iv7 is amended by striking which is placed in service before ,january #a1 #bjag and inserting the construction of which begins before ,january #a1 #bjbb4 7e7 ,extension of qualified small wind energy property ,section #dh7;c77#d77;,c7 is amended by striking for any period after ,december #ca1 #bjaf and inserting the construction of which does not begin before ,january #a1 #bjbb4 7f7 ,extension of thermal energy property ,section #dh7;a77#c77;,a77vii7 is amended by striking periods ending before ,january #a1 #bjag and inserting property the construction of which begins before ,january #a1 #bjbb4 7g7 ,phaseout of #cj percent credit rate for fuel cell and small wind energy property ,section #dh7;a7 is amended by adding at the end the following new paragraph3 7#g7 ,phaseout for qualified fuel cell property and qualified small wind energy property 7,a7 ,in general ,in the case of qualified fuel cell property or qualified small wind energy property1 the construction of which begins before ,january #a1 #bjbb1 the energy percentage determined under paragraph 7#b7 shall be equal to-- 7i7 in the case of any property the construction of which begins after ,december #ca1 #bjai1 and before ,january #a1 #bjba1 #bf percent1 and 7ii7 in the case of any property the construction of which begins after ,december #ca1 #bjbj1 and before ,january #a1 #bjbb1 #bb percent4 7,b7 ,placed in service deadline ,in the case of any qualified fuel cell property or qualified small wind energy property1 the construction of which begins before ,january #a1 #bjbb1 and which is not placed in service before ,january #a1 #bjbd1 the energy percentage determined under paragraph 7#b7 shall be equal to #aj percent4 4 7h7 ,phaseout for fiber-optic solar energy property ,subparagraphs 7,a7 and 7,b7 of section #dh7;a77#f7 are each amended by inserting or 7#c77;,a77ii7 after paragraph 7#c77;,a77i74 7i7 ,termination of solar energy property ,section #dh7;a77#c77;,a77i7 is amended by inserting 1 the construction of which begins before ,january #a1 #bjbh1 and after equipment4 7j7 ,termination of geothermal energy property ,section #dh7;a77#c77;,a77iii7 is amended by inserting 1 the construction of which begins before ,january #a1 #bjbh1 and after equipment4 7k7 ,special rule for determination of beginning of construction ,section #dh7;c7 is amended by adding at the end the following new paragraph3 7#e7 ,special rule for determining beginning of construction ,the construction of any facility1 modification1 improvement1 addition1 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 service4 4 7l7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to periods after ,december #ca1 #bjaf1 under rules similar to the rules of section #dh7m7 of the ,internal ,revenue ,code of #aihf 7as in effect on the day before the date of the enactment of the ,revenue ,reconciliation ,act of #aiij74 7#b7 ,extension of combined heat and power system property ,the amendment made by subsection 7d7 shall apply to property placed in service after ,december #ca1 #bjaf4 7#c7 ,phaseouts and terminations ,the amendments made by subsections 7g71 7h71 7i71 and 7j7 shall take effect on the date of the enactment of this ,act4 7#d7 ,special rule for determination of beginning of construction ,the amendment made by subsection 7k7 shall apply to taxable years beginning before1 on1 or after the date of the enactment of this ,act4 #cejc4 ,extension and phaseout of residential energy efficient property 7a7 ,extension ,section #be;,d7h7 is amended by striking ,december #ca1 #bjaf 7,december #ca1 #bjba1 in the case of any qualified solar electric property expenditures and qualified solar water heating property expenditures7 and inserting ,december #ca1 #bjba4 7b7 ,phaseout 7#a7 ,in general ,paragraphs 7#c71 7#d71 and 7#e7 of section #be;,d7a7 are amended by striking #cj percent each place it appears and inserting the applicable percentage4 7#b7 ,conforming amendment ,section #be;,d7g7 of such ,code is amended by striking paragraphs 7#a7 and 7#b7 of4 7c7 ,effective date ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjaf4 #cejd4 ,repeal of enhanced oil recovery credit 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #dc 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendments 7#a7 ,section #ch7;b7 is amended by striking paragraph 7#f74 7#b7 ,section #feja7m7 is amended by striking #dc14 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #ceje4 ,repeal of credit for producing oil and gas from marginal wells 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by striking section #de;,i 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendment ,section #ch7;b7 is amended by striking paragraph 7#ai74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #cejf4 ,modifications of credit for production from advanced nuclear power facilities 7a7 ,treatment of unutilized limitation amounts ,section #de;,j7b7 is amended-- 7#a7 in paragraph 7#d71 by inserting or any amendment to after enactment of2 and 7#b7 by adding at the end the following new paragraph3 7#e7 ,allocation of unutilized limitation 7,a7 ,in general ,any unutilized national megawatt capacity limitation shall be allocated by the ,secretary under paragraph 7#c7 as rapidly as is practicable after ,december #ca1 #bjbj-- 7i7 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 capacity2 and 7ii7 then to facilities placed in service after such date in the order in which such facilities are placed in service4 7,b7 ,unutilized national megawatt capacity limitation ,the term unutilized national megawatt capacity limitation means the excess 7if any7 of-- 7i7 #f1jjj megawatts1 over 7ii7 the aggregate amount of national megawatt capacity limitation allocated by the ,secretary before ,january #a1 #bjba1 reduced by any amount of such limitation which was allocated to a facility which was not placed in service before such date4 7,c7 ,coordination with other provisions ,in the case of any unutilized national megawatt capacity limitation allocated by the ,secretary pursuant to this paragraph-- 7i7 such allocation shall be treated for purposes of this section in the same manner as an allocation of national megawatt capacity limitation2 and 7ii7 subsection 7d77#a77;,b7 shall not apply to any facility which receives such allocation4 4 7b7 ,transfer of credit by certain public entities 7#a7 ,in general ,section #de;,j is amended-- 7,a7 by redesignating subsection 7e7 as subsection 7f72 and 7,b7 by inserting after subsection 7d7 the following new subsection3 7e7 ,transfer of credit by certain public entities 7#a7 ,in general ,if1 with respect to a credit under subsection 7a7 for any taxable year-- 7,a7 the taxpayer would be a qualified public entity2 and 7,b7 such entity elects the application of this paragraph for such taxable year with respect to all 7or any portion specified in such election7 of such credit1 the eligible project partner specified in such election 7and not the qualified public entity7 shall be treated as the taxpayer for purposes of this title with respect to such credit 7or such portion thereof74 7#b7 ,definitions ,for purposes of this subsection-- 7,a7 ,qualified public entity ,the term qualified public entity means-- 7i7 a ,federal1 ,state1 or local government entity1 or any political subdivision1 agency1 or instrumentality thereof2 7ii7 a mutual or cooperative electric company described in section #eja7;c77#ab7 or section #acha7;a77#b72 or 7iii7 a not-for-profit electric utility which has or had received a loan or loan guarantee under the ,rural ,electrification ,act of #aicf4 7,b7 ,eligible project partner ,the term eligible project partner means-- 7i7 any person responsible for1 or participating in1 the design or construction of the advanced nuclear power facility to which the credit under subsection 7a7 relates2 7ii7 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 7a7 relates2 7iii7 any person who participates in the provision of nuclear fuel to the advanced nuclear power facility to which the credit under subsection 7a7 relates2 or 7iv7 any person who has an ownership interest in such facility4 7#c7 ,special rules 7,a7 ,application to partnerships ,in the case of a credit under subsection 7a7 which is determined at the partnership level-- 7i7 for purposes of paragraph 7#a77;,a71 a qualified public entity shall be treated as the taxpayer with respect to such entity's distributive share of such credit2 and 7ii7 the term eligible project partner shall include any partner of the partnership4 7,b7 ,taxable year in which credit taken into account ,in the case of any credit 7or portion thereof7 with respect to which an election is made under paragraph 7#a71 such credit shall be taken into account in the first taxable year of the eligible project partner ending with1 or after1 the qualified public entity's taxable year with respect to which the credit was determined4 7,c7 ,treatment of transfer under private use rules ,for purposes of section #ada7;b77#a71 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 use4 4 7#b7 ,special rule for proceeds of transfers for mutual or cooperative electric companies ,section #eja7;c77#ab7 of such ,code is amended by adding at the end the following new subparagraph3 7,i7 ,in the case of a mutual or cooperative electric company described in this paragraph or an organization described in section #acha7;a77#b71 income received or accrued in connection with an election under section #de;,j7e77#a7 shall be treated as an amount collected from members for the sole purpose of meeting losses and expenses4 4 7c7 ,effective dates 7#a7 ,treatment of unutilized limitation amounts ,the amendment made by subsection 7a7 shall take effect on the date of the enactment of this ,act4 7#b7 ,transfer of credit by certain public entities ,the amendments made by subsection 7b7 shall apply to taxable years beginning after the date of the enactment of this ,act4 ,g ,bond reforms #cfja4 ,termination of private activity bonds 7a7 ,in general ,paragraph 7#a7 of section #ajc7;b7 is amended-- 7#a7 by striking which is not a qualified bond 7within the meaning of section #ada71 and 7#b7 by striking which is not a qualified bond in the heading thereof4 7b7 ,conforming amendments 7#a7 ,subpart ,a of part ,,iv of subchapter ,b of chapter #a is amended by striking sections #adb1 #adc1 #add1 #ade1 #adf1 and #adg 7and by striking each of the items relating to such sections in the table of sections for such subpart74 7#b7 ,section #be is amended by adding at the end the following new subsection3 7j7 ,coordination with repeal of private activity bonds ,any reference to section #adc1 #add1 or #adf shall be treated as a reference to such section as in effect before its repeal by the ,tax ,cuts and ,jobs ,act4 4 7#c7 ,section #bf7;b77#b7 is amended by striking subparagraph 7,d74 7#d7 ,section #ada7;b7 is amended by striking paragraphs 7#e7 and 7#i74 7#e7 ,section #ada7;d7 is amended by striking paragraph 7#e74 7#f7 ,section #ada is amended by striking subsection 7e74 7#g7 ,section #adh7;f77#d7 is amended-- 7,a7 by striking 7determined in accordance with section #adg7;b77#b77;,a77 in the flush matter following subparagraph 7,a77ii7 and inserting 7determined by taking into account the respective issue prices of the bonds issued as part of the issue71 and 7,b7 by striking the last sentence of subparagraph 7,d77v74 7#h7 ,clause 7iv7 of section #adh7;f77#d77;,c7 is amended to read as follows3 7iv7 ,construction issue ,for purposes of this subparagraph-- 7,i7 ,in general ,the term construction issue means any issue if at least #ge percent of the available construction proceeds of such issue are to be used for construction expenditures4 7,,ii7 ,construction ,the term construction includes reconstruction and rehabilitation4 4 7#i7 ,section #adi7;b77#c7 is amended by striking subparagraph 7,c74 7#aj7 ,section #adi7;e77#b7 is amended-- 7,a7 by striking subparagraphs 7,c71 7,d71 and 7,f7 and by redesignating subparagraphs 7,e7 and 7,g7 as subparagraphs 7,c7 and 7,d71 respectively1 and 7,b7 by striking the second sentence4 7#aa7 ,section #adi7;f77#f7 is amended-- 7,a7 by striking subparagraph 7,b71 and 7,b7 by striking ,for purposes of this subsection and all that follows through ,the term and inserting the following3 ,for purposes of this subsection1 the term4 7#ab7 ,section #aej7;e77#c7 is amended to read as follows3 7#c7 ,public approval requirement ,a bond shall not be treated as part of an issue which meets the requirements of paragraph 7#a7 unless such bond satisfies the requirements of section #adg7;f77#b7 7as in effect before its repeal by the ,tax ,cuts and ,jobs ,act74 4 7#ac7 ,section #bfi;,a7b77#c7 is amended by striking #add7;a77#c7 and inserting #dad7n77#f77;,a74 7#ad7 ,section #dad7m77#e7 is amended by striking section #add7;a77#c7 and inserting subsection 7n77#f77;,a74 7#ae7 ,section #dad7n77#f77;,a7 is amended to read as follows3 7,a7 ,related persons ,a person is a related person to another person if-- 7i7 the relationship between such persons would result in a disallowance of losses under section #bfg or #gjg7;b71 or 7ii7 such persons are members of the same controlled group of corporations 7as defined in section #aefc7;a71 except that more than #ej percent shall be substituted for at least #hj percent each place it appears therein74 4 7#af7 ,section #fjde7;e77#d77;,b7 is amended by inserting 7as in effect before its repeal by the ,tax ,cuts and ,jobs ,act7 after section #adc7m77#c74 7#ag7 ,section #ffed7;f77#a7 is amended by inserting 7as in effect before its repeal by the ,tax ,cuts and ,jobs ,act7 after section #adc7m74 7#ah7 ,section #ghga7;c7 is amended-- 7,a7 by striking paragraphs 7#b7 and 7#c71 and 7,b7 by striking tax-exempt bonds4-- and all that follows through ,subsection 7a7 of section #ajc and inserting the following3 tax-exempt bonds4--,subsection 7a7 of section #ajc4 7c7 ,effective date ,the amendments made by this section shall apply to bonds issued after ,december #ca1 #bjag4 #cfjb4 ,repeal of advance refunding bonds 7a7 ,in general ,paragraph 7#a7 of section #adi7;d7 is amended by striking as part of an issue described in paragraph 7#b71 7#c71 or 7#d74 and inserting to advance refund another bond44 7b7 ,conforming amendments 7#a7 ,section #adi7;d7 is amended by striking paragraphs 7#b71 7#c71 7#d71 and 7#f7 and by redesignating paragraphs 7#e7 and 7#g7 as paragraphs 7#b7 and 7#c74 7#b7 ,section #adh7;f77#d77;,c7 is amended by striking clause 7xiv7 and by redesignating clauses 7xv7 to 7xvii7 as clauses 7xiv7 to 7xvi74 7c7 ,effective date ,the amendments made by this section shall apply to advance refunding bonds issued after ,december #ca1 #bjag4 #cfjc4 ,repeal of tax credit bonds 7a7 ,in general ,part ,,iv of subchapter ,a of chapter #a is amended by striking subparts ,h1 ,i1 and ,j 7and by striking the items relating to such subparts in the table of subparts for such part74 7b7 ,payments to issuers ,subchapter ,b of chapter #fe is amended by striking section #fdca 7and by striking the item relating to such section in the table of sections for such subchapter74 7c7 ,conforming amendments 7#a7 ,part ,,iv of subchapter ,u of chapter #a is amended by striking section #acig;,e 7and by striking the item relating to such section in the table of sections for such part74 7#b7 ,section #ed7l77#c77;,b7 is amended by inserting 7as in effect before its repeal by the ,tax ,cuts and ,jobs ,act7 after section #acig;,e7,i74 7#c7 ,section #fbaa7;b77#d77;,a7 is amended by striking 1 and #fdca and inserting and before #cf;,b4 7#d7 ,section #fdja7;b77#a7 is amended by striking ,g1 ,h1 ,i1 and ,j and inserting and ,g4 7d7 ,effective date ,the amendments made by this section shall apply to bonds issued after ,december #ca1 #bjag4 #cfjd4 ,no tax exempt bonds for professional stadiums 7a7 ,in general ,section #ajc7;b71 as amended by this ,act1 is further amended by adding at the end the following new paragraph3 7#d7 ,professional stadium bond ,any professional stadium bond4 4 7b7 ,professional stadium bond defined ,subsection 7c7 of section #ajc is amended by adding at the end the following new paragraph3 7#c7 ,professional stadium bond ,the term professional stadium bond means any bond issued as part of an issue any proceeds of which are used to finance or refinance capital expenditures allocable to a facility 7or appurtenant real property7 which1 during at least #e days during any calendar year1 is used as a stadium or arena for professional sports exhibitions1 games1 or training4 4 7c7 ,effective date ,the amendments made by this section shall apply to bonds issued after ,november #b1 #bjag4 ,h ,insurance #cgja4 ,net operating losses of life insurance companies 7a7 ,in general ,section #hje7;b7 is amended by striking paragraph 7#d7 and by redesignating paragraph 7#e7 as paragraph 7#d74 7b7 ,conforming amendments 7#a7 ,part ,i of subchapter ,l of chapter #a is amended by striking section #haj 7and by striking the item relating to such section in the table of sections for such part74 7#b7 ,part ,,iii of subchapter ,l of chapter #a is amended by striking section #hdd 7and by striking the item relating to such section in the table of sections for such part74 7#c7 ,section #cha is amended by striking subsection 7d74 7#d7 ,section #hje7;a77#d77;,b77ii7 is amended to read as follows3 7ii7 the deduction allowed under section #agb1 4 7#e7 ,section #hje7;a7 is amended by striking paragraph 7#e74 7#f7 ,section #iec7;b77#a77;,b7 is amended to read as follows3 7,b7 ,so much of section #hje7;a77#h7 as relates to the deduction allowed under section #agb4 4 7c7 ,effective date ,the amendments made by this section shall apply to losses arising in taxable years beginning after ,december #ca1 #bjag4 #cgjb4 ,repeal of small life insurance company deduction 7a7 ,in general ,part ,i of subchapter ,l of chapter #a is amended by striking section #hjf 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 ,section #dec;,b7e7 is amended-- 7,a7 by striking 7as defined in section #hjf7;b77#c77 in paragraph 7#b77;,b71 and 7,b7 by adding at the end the following new paragraph3 7#c7 ,noninsurance business 7,a7 ,in general ,for purposes of this subsection1 the term noninsurance business means any activity which is not an insurance business4 7,b7 ,certain activities treated as insurance businesses ,for purposes of subparagraph 7,a71 any activity which is not an insurance business shall be treated as an insurance business if-- 7i7 it is of a type traditionally carried on by life insurance companies for investment purposes1 but only if the carrying on of such activity 7other than in the case of real estate7 does not constitute the active conduct of a trade or business1 or 7ii7 it involves the performance of administrative services in connection with plans providing life insurance1 pension1 or accident and health benefits4 4 7#b7 ,section #dfe7;c77#g77;,d77v77,,ii7 is amended by striking section #hjf7;b77#c7 and inserting section #dec;,b7e77#c74 7#c7 ,section #hja7;a77#b7 is amended by striking subparagraph 7,c74 7#d7 ,section #hjd is amended by striking means-- and all that follows and inserting means the general deductions provided in section #hje44 7#e7 ,section #hje7;a77#d77;,b71 as amended by section #cgja1 is amended by striking clause 7i7 and by redesignating clauses 7ii71 7iii71 and 7iv7 as clauses 7i71 7ii71 and 7iii71 respectively4 7#f7 ,section #hje7;b77#b77;,a7 is amended by striking clause 7iii7 and by redesignating clauses 7iv7 and 7v7 as clauses 7iii7 and 7iv71 respectively4 7#g7 ,section #hdb7;c7 is amended by striking paragraph 7#a7 and by redesignating paragraphs 7#b7 and 7#c7 as paragraphs 7#a7 and 7#b71 respectively4 7#h7 ,section #iec7;b77#a71 as amended by section #cgja1 is amended by striking subparagraph 7,a7 and by redesignating subparagraphs 7,b7 and 7,c7 as subparagraphs 7,a7 and 7,b71 respectively4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #cgjc4 ,surtax on life insurance company taxable income 7a7 ,in general ,section #hja7;a77#a7 is amended-- 7#a7 by striking consist of a tax and insert consist of the sum of-- 7,a7 a tax 1 and 7#b7 by striking the period at the end and inserting 1 and1 and 7#c7 by adding at the end the following new subparagraph3 7,b7 a tax equal to #h percent of the life insurance company taxable income4 4 #cgjd4 ,adjustment for change in computing reserves 7a7 ,in general ,paragraph 7#a7 of section #hjg7;f7 is amended to read as follows3 7#a7 ,treatment as change in method of accounting ,if the basis for determining any item referred to in subsection 7c7 as of the close of any taxable year differs from the basis for such determination as of the close of the preceding taxable year1 then so much of the difference between-- 7,a7 the amount of the item at the close of the taxable year1 computed on the new basis1 and 7,b7 the amount of the item at the close of the taxable year1 computed on the old basis1 as is attributable to contracts issued before the taxable year shall be taken into account under section #dha as adjustments attributable to a change in method of accounting initiated by the taxpayer and made with the consent of the ,secretary4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #cgje4 ,repeal of special rule for distributions to shareholders from pre-#aihd policyholders surplus account 7a7 ,in general ,subpart ,d of part ,i of subchapter ,l is amended by striking section #hae 7and by striking the item relating to such section in the table of sections for such subpart74 7b7 ,conforming amendment ,section #hja is amended by striking subsection 7c74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7d7 ,phased inclusion of remaining balance of policyholders surplus accounts ,in the case of any stock life insurance company which has a balance 7determined as of the close of such company's last taxable year beginning before ,january #a1 #bjah7 in an existing policyholders surplus account 7as defined in section #hae of the ,internal ,revenue ,code of #aihf1 as in effect before its repeal71 the tax imposed by section #hja of such ,code for the first #h taxable years beginning after ,december #ca1 #bjag1 shall be the amount which would be imposed by such section for such year on the sum of-- 7#a7 life insurance company taxable income for such year 7within the meaning of such section #hja but not less than zero71 plus 7#b7 #a_/h of such balance4 #cgjf4 ,modification of proration rules for property and casualty insurance companies 7a7 ,in general ,section #hcb7;b77#e77;,b7 is amended by striking #ae percent and inserting #bf4be percent4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #cgjg4 ,modification of discounting rules for property and casualty insurance companies 7a7 ,modification of rate of interest used to discount unpaid losses ,paragraph 7#b7 of section #hdf7;c7 is amended to read as follows3 7#b7 ,determination of annual rate ,the annual rate determined by the ,secretary under this paragraph for any calendar year shall be a rate determined on the basis of the corporate bond yield curve 7as defined in section #dcj7;h77#b77;,d77i774 4 7b7 ,modification of computational rules for loss payment patterns ,section #hdf7;d77#c7 is amended by striking subparagraphs 7,b7 through 7,g7 and inserting the following new subparagraphs3 7,b7 ,treatment of certain losses ,losses which would have been treated as paid in the last year of the period applicable under subparagraph 7,a77i7 or 7,a77ii7 shall be treated as paid in the following manner3 7i7 #c-year loss payment pattern 7,i7 ,in general ,the period taken into account under subparagraph 7,a77i7 shall be extended to the extent required under subclause 7,,ii74 7,,ii7 ,computation of extension ,the amount of losses which would have been treated as paid in the #c;d year after the accident year shall be treated as paid in such #c;d year and each subsequent year in an amount equal to the average of the losses treated as paid in the #ast and #b;d years after the accident year 7or1 if lesser1 the portion of the unpaid losses not theretofore taken into account74 ,to the extent such unpaid losses have not been treated as paid before the #ahth year after the accident year1 they shall be treated as paid in such #ahth year4 7ii7 #aj-year loss payment pattern 7,i7 ,in general ,the period taken into account under subparagraph 7,a77ii7 shall be extended to the extent required under subclause 7,,ii74 7,,ii7 ,computation of extension ,the amount of losses which would have been treated as paid in the #ajth year after the accident year shall be treated as paid in such #ajth year and each subsequent year in an amount equal to the amount of the average of the losses treated as paid in the #gth1 #hth1 and #ith years after the accident year 7or1 if lesser1 the portion of the unpaid losses not theretofore taken into account74 ,to the extent such unpaid losses have not been treated as paid before the #beth year after the accident year1 they shall be treated as paid in such #beth year4 4 7c7 ,repeal of historical payment pattern election ,section #hdf is amended by striking subsection 7e7 and by redesignating subsections 7f7 and 7g7 as subsections 7e7 and 7f71 respectively4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7e7 ,transitional rule ,for the first taxable year beginning after ,december #ca1 #bjag-- 7#a7 the unpaid losses and the expenses unpaid 7as defined in paragraphs 7#e77;,b7 and 7#f7 of section #hcb7;b7 of the ,internal ,revenue ,code of #aihf7 at the end of the preceding taxable year1 and 7#b7 the unpaid losses as defined in sections #hjg7;c77#b7 and #hje7;a77#a7 of such ,code at the end of the preceding taxable year1 shall be determined as if the amendments made by this section had applied to such unpaid losses and expenses unpaid in the preceding taxable year and by using the interest rate and loss payment patterns applicable to accident years ending with calendar year #bjah1 and any adjustment shall be taken into account ratably in such first taxable year and the #g succeeding taxable years4 ,for subsequent taxable years1 such amendments shall be applied with respect to such unpaid losses and expenses unpaid by using the interest rate and loss payment patterns applicable to accident years ending with calendar year #bjah4 #cgjh4 ,repeal of special estimated tax payments 7a7 ,in general ,part ,,iii of subchapter ,l of chapter #a is amended by striking section #hdg 7and by striking the item relating to such section in the table of sections for such part74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,i ,compensation #chja4 ,modification of limitation on excessive employee remuneration 7a7 ,repeal of performance-based compensation and commission exceptions for limitation on excessive employee remuneration 7#a7 ,in general ,section #afb7m77#d7 is amended by striking subparagraphs 7,b7 and 7,c7 and by redesignating subparagraphs 7,d71 7,e71 7,f71 and 7,g7 as subparagraphs 7,b71 7,c71 7,d71 and 7,e71 respectively4 7#b7 ,conforming amendments 7,a7 ,paragraphs 7#e77;,e7 and 7#f77;,d7 of section #afb7m7 are each amended by striking subparagraphs 7,b71 7,c71 and 7,d7 and inserting subparagraph 7,b74 7,b7 ,paragraphs 7#e77;,g7 and 7#f77;,g7 of section #afb7m7 are each amended by striking 7,f7 and 7,g7 and inserting 7,d7 and 7,e74 7b7 ,expansion of applicable employer ,section #afb7m77#b7 is amended to read as follows3 7#b7 ,publicly held corporation ,for purposes of this subsection1 the term publicly held corporation means any corporation which is an issuer 7as defined in section #c of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c77-- 7,a7 the securities of which are required to be registered under section #ab of such ,act 7#ae ,u4,s4,c4 #ghl71 or 7,b7 that is required to file reports under section #ae7;d7 of such ,act 7#ae ,u4,s4,c4 #gho7d774 4 7c7 ,modification of definition of covered employees ,section #afb7m77#c7 is amended-- 7#a7 in subparagraph 7,a71 by striking as of the close of the taxable year1 such employee is the chief executive officer of the taxpayer or is and inserting such employee is the principal executive officer or principal financial officer of the taxpayer at any time during the taxable year1 or was1 7#b7 in subparagraph 7,b7-- 7,a7 by striking #d and inserting #c1 and 7,b7 by striking 7other than the chief executive officer7 and inserting 7other than the principal executive officer or principal financial officer71 and 7#c7 by striking or at the end of subparagraph 7,a71 by striking the period at the end of subparagraph 7,b7 and inserting 1 or1 and by adding at the end the following3 7,c7 was a covered employee of the taxpayer 7or any predecessor7 for any preceding taxable year beginning after ,december #ca1 #bjaf4 ,such term shall include any employee who would be described in subparagraph 7,b7 if the reporting described in such subparagraph were required as so described4 4 7d7 ,special rule for remuneration paid to beneficiaries1 etc ,section #afb7m77#d71 as amended by subsection 7a71 is amended by adding at the end the following new subparagraph3 7,f7 ,special rule for remuneration paid to beneficiaries1 etc ,remuneration shall not fail to be applicable employee remuneration merely because it is includible in the income of1 or paid to1 a person other than the covered employee1 including after the death of the covered employee4 4 7e7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #chjb4 ,excise tax on excess tax-exempt organization executive compensation 7a7 ,in general ,subchapter ,d of chapter #db is amended by adding at the end the following new section3 #difj4 ,tax on excess tax-exempt organization executive compensation 7a7 ,tax imposed ,there is hereby imposed a tax equal to #bj percent of the sum of-- 7#a7 so much of the remuneration paid 7other than any excess parachute payment7 by an applicable tax-exempt organization for the taxable year with respect to employment of any covered employee in excess of #a1jjj1jjj1 plus 7#b7 any excess parachute payment paid by such an organization to any covered employee4 7b7 ,liability for tax ,the employer shall be liable for the tax imposed under subsection 7a74 7c7 ,definitions and special rules ,for purposes of this section-- 7#a7 ,applicable tax-exempt organization ,the term applicable tax-exempt organization means any organization that for the taxable year-- 7,a7 is exempt from taxation under section #eja7;a71 7,b7 is a farmers' cooperative organization described in section #eba7;b77#a71 7,c7 has income excluded from taxation under section #aae7a71 or 7,d7 is a political organization described in section #ebg7;e77#a74 7#b7 ,covered employee ,for purposes of this section1 the term covered employee means any employee 7including any former employee7 of an applicable tax-exempt organization if the employee-- 7,a7 is one of the #e highest compensated employees of the organization for the taxable year1 or 7,b7 was a covered employee of the organization 7or any predecessor7 for any preceding taxable year beginning after ,december #ca1 #bjaf4 7#c7 ,remuneration ,for purposes of this section1 the term remuneration means wages 7as defined in section #cdja7;a771 except that such term shall not include any designated ,roth contribution 7as defined in section #djb;,a7c774 7#d7 ,remuneration from related organizations 7,a7 ,in general ,remuneration of a covered employee paid by an applicable tax-exempt organization shall include any remuneration paid with respect to employment of such employee by any related person or governmental entity4 7,b7 ,related organizations ,a person or governmental entity shall be treated as related to an applicable tax-exempt organization if such person or governmental entity-- 7i7 controls1 or is controlled by1 the organization1 7ii7 is controlled by one or more persons that control the organization1 7iii7 is a supported organization 7as defined in section #eji7;f77#b77 during the taxable year with respect to the organization1 7iv7 is a supporting organization described in section #eji7;a77#c7 during the taxable year with respect to the organization1 or 7v7 in the case of an organization that is a voluntary employees' beneficiary association described in section #eja7;a77#i71 establishes1 maintains1 or makes contributions to such voluntary employees' beneficiary association4 7,c7 ,liability for tax ,in any case in which remuneration from more than one employer is taken into account under this paragraph in determining the tax imposed by subsection 7a71 each such employer shall be liable for such tax in an amount which bears the same ratio to the total tax determined under subsection 7a7 with respect to such remuneration as-- 7i7 the amount of remuneration paid by such employer with respect to such employee1 bears to 7ii7 the amount of remuneration paid by all such employers to such employee4 7#e7 ,excess parachute payment ,for purposes determining the tax imposed by subsection 7a77#b7-- 7,a7 ,in general ,the term excess parachute payment means an amount equal to the excess of any parachute payment over the portion of the base amount allocated to such payment4 7,b7 ,parachute payment ,the term parachute payment means any payment in the nature of compensation to 7or for the benefit of7 a covered employee if-- 7i7 such payment is contingent on such employee's separation from employment with the employer1 and 7ii7 the aggregate present value of the payments in the nature of compensation to 7or for the benefit of7 such individual which are contingent on such separation equals or exceeds an amount equal to #c times the base amount4 ,such term does not include any payment described in section #bhj;,g7b77#f7 7relating to exemption for payments under qualified plans7 or any payment made under or to an annuity contract described in section #djc7;b7 or a plan described in section #deg7;b74 7,c7 ,base amount ,rules similar to the rules of #bhj;,g7b77#c7 shall apply for purposes of determining the base amount4 7,d7 ,property transfers2 present value ,rules similar to the rules of paragraphs 7#c7 and 7#d7 of section #bhj;,g7d7 shall apply4 7#f7 ,coordination with deduction limitation ,remuneration the deduction for which is not allowed by reason of section #afb7m7 shall not be taken into account for purposes of this section4 7d7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary to prevent avoidance of the purposes of this section through the performance of services other than as an employee4 4 7b7 ,clerical amendment ,the table of sections for subchapter ,d of chapter #db is amended by adding at the end the following new item3 ,sec4 #difj4 ,tax on excess exempt organization executive compensation4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #chjc4 ,treatment of qualified equity grants 7a7 ,in general 7#a7 ,election to defer income ,section #hc is amended by adding at the end the following new subsection3 7i7 ,qualified equity grants 7#a7 ,in general ,for purposes of this subtitle1 if qualified stock is transferred to a qualified employee who makes an election with respect to such stock under this subsection-- 7,a7 except as provided in subparagraph 7,b71 no amount shall be included in income under subsection 7a7 for the first taxable year in which the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture1 whichever is applicable1 and 7,b7 an amount equal to the amount which would be included in income of the employee under subsection 7a7 7determined without regard to this subsection7 shall be included in income for the taxable year of the employee which includes the earliest of-- 7i7 the first date such qualified stock becomes transferable 7including transferable to the employer71 7ii7 the date the employee first becomes an excluded employee1 7iii7 the first date on which any stock of the corporation which issued the qualified stock becomes readily tradable on an established securities market 7as determined by the ,secretary1 but not including any market unless such market is recognized as an established securities market by the ,secretary for purposes of a provision of this title other than this subsection71 7iv7 the date that is #e years after the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture1 whichever occurs earlier1 or 7v7 the date on which the employee revokes 7at such time and in such manner as the ,secretary may provide7 the election under this subsection with respect to such stock4 7#b7 ,qualified stock 7,a7 ,in general ,for purposes of this subsection1 the term qualified stock means1 with respect to any qualified employee1 any stock in a corporation which is the employer of such employee1 if-- 7i7 such stock is received-- 7,i7 in connection with the exercise of an option1 or 7,,ii7 in settlement of a restricted stock unit1 and 7ii7 such option or restricted stock unit was provided by the corporation-- 7,i7 in connection with the performance of services as an employee1 and 7,,ii7 during a calendar year in which such corporation was an eligible corporation4 7,b7 ,limitation ,the term qualified stock shall not include any stock if the employee may sell such stock to1 or otherwise receive cash in lieu of stock from1 the corporation at the time that the rights of the employee in such stock first become transferable or not subject to a substantial risk of forfeiture4 7,c7 ,eligible corporation ,for purposes of subparagraph 7,a77ii77,,ii7-- 7i7 ,in general ,the term eligible corporation means1 with respect to any calendar year1 any corporation if-- 7,i7 no stock of such corporation 7or any predecessor of such corporation7 is readily tradable on an established securities market 7as determined under paragraph 7#a77;,b77iii77 during any preceding calendar year1 and 7,,ii7 such corporation has a written plan under which1 in such calendar year1 not less than #hj percent of all employees who provide services to such corporation in the ,united ,states 7or any possession of the ,united ,states7 are granted stock options1 or restricted stock units1 with the same rights and privileges to receive qualified stock4 7ii7 ,same rights and privileges ,for purposes of clause 7i77,,ii7-- 7,i7 except as provided in subclauses 7,,ii7 and 7,,iii71 the determination of rights and privileges with respect to stock shall be determined in a similar manner as provided under section #dbc7;b77#e71 7,,ii7 employees shall not fail to be treated as having the same rights and privileges to receive qualified stock solely because the number of shares available to all employees is not equal in amount1 so long as the number of shares available to each employee is more than a de minimis amount1 and 7,,iii7 rights and privileges with respect to the exercise of an option shall not be treated as the same as rights and privileges with respect to the settlement of a restricted stock unit4 7iii7 ,employee ,for purposes of clause 7i77,,ii71 the term employee shall not include any employee described in section #dihj;,e7d77#d7 or any excluded employee4 7iv7 ,special rule for calendar years before #bjah ,in the case of any calendar year beginning before ,january #a1 #bjah1 clause 7i77,,ii7 shall be applied without regard to whether the rights and privileges with respect to the qualified stock are the same4 7#c7 ,qualified employee2 excluded employee ,for purposes of this subsection-- 7,a7 ,in general ,the term qualified employee means any individual who-- 7i7 is not an excluded employee1 and 7ii7 agrees in the election made under this subsection to meet such requirements as determined by the ,secretary to be necessary to ensure that the withholding requirements of the corporation under chapter #bd with respect to the qualified stock are met4 7,b7 ,excluded employee ,the term excluded employee means1 with respect to any corporation1 any individual-- 7i7 who was a #a-percent owner 7within the meaning of section #daf7;i77#a77;,b77ii77 at any time during the #aj preceding calendar years1 7ii7 who is or has been at any prior time-- 7,i7 the chief executive officer of such corporation or an individual acting in such a capacity1 or 7,,ii7 the chief financial officer of such corporation or an individual acting in such a capacity1 7iii7 who bears a relationship described in section #cah7;a77#a7 to any individual described in subclause 7,i7 or 7,,ii7 of clause 7ii71 or 7iv7 who has been for any of the #aj preceding taxable years one of the #d highest compensated officers of such corporation determined with respect to each such taxable year on the basis of the shareholder disclosure rules for compensation under the ,securities ,exchange ,act of #aicd 7as if such rules applied to such corporation74 7#d7 ,election 7,a7 ,time for making election ,an election with respect to qualified stock shall be made under this subsection no later than #cj days after the first time the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture1 whichever occurs earlier1 and shall be made in a manner similar to the manner in which an election is made under subsection 7b74 7,b7 ,limitations ,no election may be made under this section with respect to any qualified stock if-- 7i7 the qualified employee has made an election under subsection 7b7 with respect to such qualified stock1 7ii7 any stock of the corporation which issued the qualified stock is readily tradable on an established securities market 7as determined under paragraph 7#a77;,b77iii77 at any time before the election is made1 or 7iii7 such corporation purchased any of its outstanding stock in the calendar year preceding the calendar year which includes the first time the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture1 unless-- 7,i7 not less than #be percent of the total dollar amount of the stock so purchased is deferral stock1 and 7,,ii7 the determination of which individuals from whom deferral stock is purchased is made on a reasonable basis4 7,c7 ,definitions and special rules related to limitation on stock redemptions 7i7 ,deferral stock ,for purposes of this paragraph1 the term deferral stock means stock with respect to which an election is in effect under this subsection4 7ii7 ,deferral stock with respect to any individual not taken into account if individual holds deferral stock with longer deferral period ,stock purchased by a corporation from any individual shall not be treated as deferral stock for purposes of clause 7iii7 if such individual 7immediately after such purchase7 holds any deferral stock with respect to which an election has been in effect under this subsection for a longer period than the election with respect to the stock so purchased4 7iii7 ,purchase of all outstanding deferral stock ,the requirements of subclauses 7,i7 and 7,,ii7 of subparagraph 7,b77iii7 shall be treated as met if the stock so purchased includes all of the corporation's outstanding deferral stock4 7iv7 ,reporting ,any corporation which has outstanding deferral stock as of the beginning of any calendar year and which purchases any of its outstanding stock during such calendar year shall include on its return of tax for the taxable year in which1 or with which1 such calendar year ends the total dollar amount of its outstanding stock so purchased during such calendar year and such other information as the ,secretary may require for purposes of administering this paragraph4 7#e7 ,controlled groups ,for purposes of this subsection1 all corporations which are members of the same controlled group of corporations 7as defined in section #aefc7;a77 shall be treated as one corporation4 7#f7 ,notice requirement ,any corporation that transfers qualified stock to a qualified employee shall1 at the time that 7or a reasonable period before7 an amount attributable to such stock would 7but for this subsection7 first be includible in the gross income of such employee-- 7,a7 certify to such employee that such stock is qualified stock1 and 7,b7 notify such employee-- 7i7 that the employee may elect to defer income on such stock under this subsection1 and 7ii7 that1 if the employee makes such an election-- 7,i7 the amount of income recognized at the end of the deferral period will be based on the value of the stock at the time at which the rights of the employee in such stock first become transferable or not subject to substantial risk of forfeiture1 notwithstanding whether the value of the stock has declined during the deferral period1 7,,ii7 the amount of such income recognized at the end of the deferral period will be subject to withholding under section #cdja7;i7 at the rate determined under section #cdjb7t71 and 7,,iii7 the responsibilities of the employee 7as determined by the ,secretary under paragraph 7#c77;,a77ii77 with respect to such withholding4 7#g7 ,restricted stock units ,this section 7other than this subsection71 including any election under subsection 7b71 shall not apply to restricted stock units4 4 7#b7 ,deduction by employer ,subsection 7h7 of section #hc is amended by striking or 7d77#b7 and inserting 7d77#b71 or 7i74 7b7 ,withholding 7#a7 ,time of withholding ,section #cdja is amended by adding at the end the following new subsection3 7i7 ,qualified stock for which an election is in effect under section #hc7;i7 ,for purposes of subsection 7a71 qualified stock 7as defined in section #hc7;i77 with respect to which an election is made under section #hc7;i7 shall be treated as wages-- 7#a7 received on the earliest date described in section #hc7;i77#a77;,b71 and 7#b7 in an amount equal to the amount included in income under section #hc for the taxable year which includes such date4 4 7#b7 ,amount of withholding ,section #cdjb is amended by adding at the end the following new subsection3 7t7 ,rate of withholding for certain stock ,in the case of any qualified stock 7as defined in section #hc7;i77 with respect to which an election is made under section #hc7;i7-- 7#a7 the rate of tax under subsection 7a7 shall not be less than the maximum rate of tax in effect under section #a1 and 7#b7 such stock shall be treated for purposes of section #ceja7;b7 in the same manner as a non-cash fringe benefit4 4 7c7 ,coordination with other deferred compensation rules 7#a7 ,election to apply deferral to statutory options 7,a7 ,incentive stock options ,section #dbb7;b7 is amended by adding at the end the following3 ,such term shall not include any option if an election is made under section #hc7;i7 with respect to the stock received in connection with the exercise of such option44 7,b7 ,employee stock purchase plans ,section #dbc7;a7 is amended by adding at the end the following flush sentence3 ,the preceding sentence shall not apply to any share of stock with respect to which an election is made under section #hc7;i74 4 7#b7 ,exclusion from definition of nonqualified deferred compensation plan ,subsection 7d7 of section #dji;,a is amended by adding at the end the following new paragraph3 7#g7 ,treatment of qualified stock ,an arrangement under which an employee may receive qualified stock 7as defined in section #hc7;i77#b77 shall not be treated as a nonqualified deferred compensation plan solely because of an employee's election1 or ability to make an election1 to defer recognition of income under section #hc7;i74 4 7d7 ,information reporting ,section #fjea7;a7 is amended by striking and at the end of paragraph 7#ac71 by striking the period at the end of paragraph 7#ad7 and inserting a comma1 and by inserting after paragraph 7#ad7 the following new paragraphs3 7#ae7 the amount excludable from gross income under subparagraph 7,a7 of section #hc7;i77#a71 7#af7 the amount includible in gross income under subparagraph 7,b7 of section #hc7;i77#a7 with respect to an event described in such subparagraph which occurs in such calendar year1 and 7#ag7 the aggregate amount of income which is being deferred pursuant to elections under section #hc7;i71 determined as of the close of the calendar year4 4 7e7 ,penalty for failure of employer ,to provide notice of tax consequences ,section #ffeb is amended by adding at the end the following new subsection3 7o7 ,failure to provide notice under section #hc7;i7 ,in the case of each failure to provide a notice as required by section #hc7;i77#f71 at the time prescribed therefor1 unless it is shown that such failure is due to reasonable cause and not to willful neglect1 there shall be paid1 on notice and demand of the ,secretary and in the same manner as tax1 by the person failing to provide such notice1 an amount equal to #ajj for each such failure1 but the total amount imposed on such person for all such failures during any calendar year shall not exceed #ej1jjj4 4 7f7 ,effective dates 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to stock attributable to options exercised1 or restricted stock units settled1 after ,december #ca1 #bjag4 7#b7 ,requirement to provide notice ,the amendments made by subsection 7e7 shall apply to failures after ,december #ca1 #bjag4 7g7 ,transition rule ,until such time as the ,secretary 7or the ,secretary's delegate7 issue regulations or other guidance for purposes of implementing the requirements of paragraph 7#b77;,c77i77,,ii7 of section #hc7;i7 of the ,internal ,revenue ,code of #aihf 7as added by this section71 or the requirements of paragraph 7#f7 of such section1 a corporation shall be treated as being in compliance with such requirements 7respectively7 if such corporation complies with a reasonable good faith interpretation of such requirements4 ,,iv ,taxation of foreign income and foreign persons ,a ,establishment of participation exemption system for taxation of foreign income #djja4 ,deduction for foreign-source portion of dividends received by domestic corporations from specified #aj-percent owned foreign corporations 7a7 ,in general ,part ,,viii of subchapter ,b of chapter #a is amended by inserting after section #bde the following new section3 #bde;,a4 ,deduction for foreign-source portion of dividends received by domestic corporations from specified #aj-percent owned foreign corporations 7a7 ,in general ,in the case of any dividend received from a specified #aj-percent owned foreign corporation by a domestic corporation which is a ,united ,states shareholder with respect to such foreign corporation1 there shall be allowed as a deduction an amount equal to the foreign-source portion of such dividend4 7b7 ,specified #aj-percent owned foreign corporation ,for purposes of this section1 the term specified #aj-percent owned foreign corporation means any foreign corporation with respect to which any domestic corporation is a ,united ,states shareholder4 ,such term shall not include any passive foreign investment company 7within the meaning of subpart ,d of part ,,vi of subchapter ,p7 that is not a controlled foreign corporation4 7c7 ,foreign-source portion ,for purposes of this section-- 7#a7 ,in general ,the foreign-source portion of any dividend is an amount which bears the same ratio to such dividend as-- 7,a7 the post-#aihf undistributed foreign earnings of the specified #aj-percent owned foreign corporation1 bears to 7,b7 the total post-#aihf undistributed earnings of such foreign corporation4 7#b7 ,post-#aihf undistributed earnings ,the term post-#aihf undistributed earnings means the amount of the earnings and profits of the specified #aj-percent owned foreign corporation 7computed in accordance with sections #ifd7;a7 and #ihf7 accumulated in taxable years beginning after ,december #ca1 #aihf-- 7,a7 as of the close of the taxable year of the specified #aj-percent owned foreign corporation in which the dividend is distributed1 and 7,b7 without diminution by reason of dividends distributed during such taxable year4 7#c7 ,post-#aihf undistributed foreign earnings ,the term post-#aihf undistributed foreign earnings means the portion of the post-#aihf undistributed earnings which is attributable to neither-- 7,a7 income described in subparagraph 7,a7 of section #bde7;a77#e71 nor 7,b7 dividends described in subparagraph 7,b7 of such section 7determined without regard to section #bde7;a77#ab774 7#d7 ,treatment of distributions from earnings before #aihg 7,a7 ,in general ,in the case of any dividend paid out of earnings and profits of the specified #aj-percent owned foreign corporation 7computed in accordance with sections #ifd7;a7 and #ihf7 accumulated in taxable years beginning before ,january #a1 #aihg-- 7i7 paragraphs 7#a71 7#b71 and 7#c7 shall be applied without regard to the phrase post-#aihf each place it appears1 and 7ii7 paragraph 7#b7 shall be applied by substituting after the date specified in section #caf7;a77#a7 for in taxable years beginning after ,december #ca1 #aihf4 7,b7 ,dividends paid first out of post-#aihf earnings ,dividends shall be treated as paid out of post-#aihf undistributed earnings to the extent thereof4 7#e7 ,treatment of certain dividends in excess of undistributed earnings ,in the case of any dividend from the specified #aj-percent owned foreign corporation which is in excess of undistributed earnings 7as determined under paragraph 7#b7 after taking into account the modifications described in clauses 7i7 and 7ii7 of paragraph 7#d77;,a771 the foreign-source portion of such dividend is an amount which bears the same ratio to such dividend as-- 7,a7 the portion of the earnings and profits described in subparagraph 7,b7 which is attributable to neither income described in paragraph 7#c77;,a7 nor dividends described in paragraph 7#c77;,b71 bears to 7,b7 the earnings and profits of such corporation for the taxable year in which such distribution is made 7computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year74 7d7 ,disallowance of foreign tax credit1 etc 7#a7 ,in general ,no credit shall be allowed under section #ija for any taxes paid or accrued 7or treated as paid or accrued7 with respect to any dividend for which a deduction is allowed under this section4 7#b7 ,denial of deduction ,no deduction shall be allowed under this chapter for any tax for which credit is not allowable under section #ija by reason of paragraph 7#a7 7determined by treating the taxpayer as having elected the benefits of subpart ,a of part ,,iii of subchapter ,n74 7e7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section4 4 7b7 ,application of holding period requirement ,section #bdf7;c7 is amended-- 7#a7 by striking or #bde in paragraph 7#a7 and inserting #bde1 or #bde;,a1 and 7#b7 by adding at the end the following new paragraph3 7#e7 ,special rules for foreign source portion of dividends received from specified #aj-percent owned foreign corporations 7,a7 #f-month holding period requirement ,for purposes of section #bde;,a-- 7i7 paragraph 7#a77;,a7 shall be applied-- 7,i7 by substituting #ahj days for #de dayseach place it appears1 and 7,,ii7 by substituting #cfa-;day period for #ia-;day period1 and 7ii7 paragraph 7#b7 shall not apply4 7,b7 ,status must be maintained during holding period ,for purposes of applying paragraph 7#a7 with respect to section #bde;,a1 the taxpayer shall be treated as holding the stock referred to in paragraph 7#a7 for any period only if-- 7i7 the specified #aj-percent owned foreign corporation referred to in section #bde;,a7a7 is a specified #aj-percent owned foreign corporation for such period1 and 7ii7 the taxpayer is a ,united ,states shareholder with respect to such specified #aj-percent owned foreign corporation for such period4 4 7c7 ,application of rules generally applicable to deductions for dividends received 7#a7 ,treatment of dividends from certain corporations ,section #bdf7;a77#a7 is amended by striking and #bde and inserting #bde1 and #bde;,a4 7#b7 ,coordination with section #ajei ,section #ajei7;b77#b77;,b7 is amended by striking or #bde and inserting #bde1 or #bde;,a4 7d7 ,coordination with foreign tax credit limitation ,section #ijd7;b7 is amended by adding at the end the following new paragraph3 7#e7 ,treatment of dividends for which deduction is allowed under section #bde;,a ,for purposes of subsection 7a71 in the case of a ,united ,states shareholder with respect to a specified #aj-percent owned foreign corporation1 such shareholder's taxable income from sources without the ,united ,states 7and entire taxable income7 shall be determined without regard to-- 7,a7 the foreign-source portion of any dividend received from such foreign corporation1 and 7,b7 any deductions properly allocable or apportioned to-- 7i7 income 7other than subpart ,f income 7as defined in section #ieb7 and foreign high return amounts 7as defined in section #iea;,a7b77 with respect to stock of such specified #aj-percent owned foreign corporation1 or 7ii7 such stock 7to the extent income with respect to such stock is other than subpart ,f income 7as so defined7 or foreign high return amounts 7as so defined774 ,any term which is used in section #bde;,a and in this paragraph shall have the same meaning for purposes of this paragraph as when used in such section4 4 7e7 ,conforming amendments 7#a7 ,section #bde7;a77#d7 is amended by striking section #ijb7;c77#a7 and inserting section #bde;,a7c77#b7 applied by substituting qualified #aj-percent owned foreign corporation for specified #aj-percent owned foreign corporation each place it appears4 7#b7 ,section #iea7;b7 is amended by striking subpart and inserting title4 7#c7 ,section #ieg7;a7 is amended by striking subpart in the matter preceding paragraph 7#a7 and inserting title4 7#d7 ,the table of sections for part ,,viii of subchapter ,b of chapter #a is amended by inserting after section #bde the following new item3 ,sec4 #bde;,a4 ,deduction for foreign-source portion of dividends received by domestic corporations from specified #aj-percent owned foreign corporations4 4 7f7 ,effective date ,the amendments made by this section shall apply to distributions made after 7and1 in the case of the amendments made by subsection 7d71 deductions with respect to taxable years ending after7 ,december #ca1 #bjag4 #djjb4 ,application of participation exemption to investments in ,united ,states property 7a7 ,in general ,section #ief7;a7 is amended in the matter preceding paragraph 7#a7 by inserting 7other than a corporation7 after ,united ,states shareholder4 7b7 ,regulatory authority to prevent abuse ,section #ief7;e7 is amended by striking including regulations to prevent and inserting including regulations-- 7#a7 to address ,united ,states shareholders that are partnerships with corporate partners1 and 7#b7 to prevent 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjag4 #djjc4 ,limitation on losses with respect to specified #aj-percent owned foreign corporations 7a7 ,basis in specified #aj-percent owned foreign corporation reduced by nontaxed portion of dividend for purposes of determining loss 7#a7 ,in general ,section #ifa is amended by adding at the end the following new subsection3 7d7 ,basis in specified #aj-percent owned foreign corporation reduced by nontaxed portion of dividend for purposes of determining loss ,if a domestic corporation received a dividend from a specified #aj-percent owned foreign corporation 7as defined in section #bde;,a7 in any taxable year1 solely for purposes of determining loss on any disposition of stock of such foreign corporation in such taxable year or any subsequent taxable year1 the basis of such domestic corporation in such stock shall be reduced 7but not below zero7 by the amount of any deduction allowable to such domestic corporation under section #bde;,a with respect to such stock except to the extent such basis was reduced under section #ajei by reason of a dividend for which such a deduction was allowable4 4 7#b7 ,effective date ,the amendments made by this subsection shall apply to distributions made after ,december #ca1 #bjag4 7b7 ,treatment of foreign branch losses transferred to specified #aj-percent owned foreign corporations 7#a7 ,in general ,part ,,ii of subchapter ,b of chapter #a is amended by adding at the end the following new section3 #ia4 ,certain foreign branch losses transferred to specified #aj-percent owned foreign corporations 7a7 ,in general ,if a domestic corporation transfers substantially all of the assets of a foreign branch 7within the meaning of section #cfg7;a77#c77;,c77 to a specified #aj-percent owned foreign corporation 7as defined in section #bde;,a7 with respect to which it is a ,united ,states shareholder after such transfer1 such domestic corporation shall include in gross income for the taxable year which includes such transfer an amount equal to the transferred loss amount with respect to such transfer4 7b7 ,transferred loss amount ,for purposes of this section1 the term transferred loss amount means1 with respect to any transfer of substantially all of the assets of a foreign branch1 the excess 7if any7 of-- 7#a7 the sum of losses-- 7,a7 which were incurred by the foreign branch after ,december #ca1 #bjag1 and before the transfer1 and 7,b7 with respect to which a deduction was allowed to the taxpayer1 over 7#b7 the sum of-- 7,a7 any taxable income of such branch for a taxable year after the taxable year in which the loss was incurred and through the close of the taxable year of the transfer1 and 7,b7 any amount which is recognized under section #ijd7;f77#c7 on account of the transfer4 7c7 ,reduction for recognized gains 7#a7 ,in general ,in the case of a transfer not described in section #cfg7;a77#c77;,c71 the transferred loss amount shall be reduced 7but not below zero7 by the amount of gain recognized by the taxpayer on account of the transfer 7other than amounts taken into account under subsection 7c77#b77;,b774 7#b7 ,coordination with recognition under section #cfg ,in the case of a transfer described in section #cfg7;a77#c77;,c71 the transferred loss amount shall not exceed the excess 7if any7 of-- 7,a7 the excess of the amount described in section #cfg7;a77#c77;,c77i7 over the amount described in section #cfg7;a77#c77;,c77ii7 with respect to such transfer1 over 7,b7 the amount of gain recognized under section #cfg7;a77#c77;,c7 with respect to such transfer4 7d7 ,source of income ,amounts included in gross income under this section shall be treated as derived from sources within the ,united ,states4 7e7 ,basis adjustments ,consistent with such regulations or other guidance as the ,secretary may prescribe1 proper adjustments shall be made in the adjusted basis of the taxpayer's stock in the specified #aj-percent owned foreign corporation to which the transfer is made1 and in the transferee's adjusted basis in the property transferred1 to reflect amounts included in gross income under this section4 4 7#b7 ,amounts recognized under section #cfg on transfer of foreign branch with previously deducted losses treated as ,united ,states source ,section #cfg7;a77#c77;,c7 is amended by striking outside in the last sentence and inserting within4 7#c7 ,clerical amendment ,the table of sections for part ,,ii of subchapter ,b of chapter #a is amended by adding at the end the following new item3 ,sec4 #ia4 ,certain foreign branch losses transferred to specified #aj-percent owned foreign corporations4 4 7#d7 ,effective date ,the amendments made by this subsection shall apply to transfers after ,december #ca1 #bjag4 #djjd4 ,treatment of deferred foreign income upon transition to participation exemption system of taxation 7a7 ,in general ,section #ife is amended to read as follows3 #ife4 ,treatment of deferred foreign income upon transition to participation exemption system of taxation 7a7 ,treatment of deferred foreign income as subpart ,f income ,in the case of the last taxable year of a deferred foreign income corporation which begins before ,january #a1 #bjah1 the subpart ,f income of such foreign corporation 7as otherwise determined for such taxable year under section #ieb7 shall be increased by the greater of-- 7#a7 the accumulated post-#aihf deferred foreign income of such corporation determined as of ,november #b1 #bjag1 or 7#b7 the accumulated post-#aihf deferred foreign income of such corporation determined as of ,december #ca1 #bjag4 7b7 ,reduction in amounts included in gross income of ,united ,states shareholders of specified foreign corporations with deficits in earnings and profits 7#a7 ,in general ,in the case of a taxpayer which is a ,united ,states shareholder with respect to at least one deferred foreign income corporation and at least one ,e,p deficit foreign corporation1 the amount which would 7but for this subsection7 be taken into account under section #iea7;a77#a7 by reason of subsection 7a7 as such ,united ,states shareholder's pro rata share of the subpart ,f income of each deferred foreign income corporation shall be reduced 7but not below zero7 by the amount of such ,united ,states shareholder's aggregate foreign ,e,p deficit which is allocated under paragraph 7#b7 to such deferred foreign income corporation4 7#b7 ,allocation of aggregate foreign ,e,p deficit ,the aggregate foreign ,e,p deficit of any ,united ,states shareholder shall be allocated among the deferred foreign income corporations of such ,united ,states shareholder in an amount which bears the same proportion to such aggregate as-- 7,a7 such ,united ,states shareholder's pro rata share of the accumulated post-#aihf deferred foreign income of each such deferred foreign income corporation1 bears to 7,b7 the aggregate of such ,united ,states shareholder's pro rata share of the accumulated post-#aihf deferred foreign income of all deferred foreign income corporations of such ,united ,states shareholder4 7#c7 ,definitions related to ,e,p deficits ,for purposes of this subsection-- 7,a7 ,aggregate foreign ,e,p deficit ,the term aggregate foreign ,e,p deficit means1 with respect to any ,united ,states shareholder1 the aggregate of such shareholder's pro rata shares of the specified ,e,p deficits of the ,e,p deficit foreign corporations of such shareholder4 7,b7 ,e,p deficit foreign corporation ,the term ,e,p deficit foreign corporation means1 with respect to any taxpayer1 any specified foreign corporation with respect to which such taxpayer is a ,united ,states shareholder1 if-- 7i7 such specified foreign corporation has a deficit in post-#aihf earnings and profits1 and 7ii7 as of ,november #b1 #bjag-- 7,i7 such corporation was a specified foreign corporation1 and 7,,ii7 such taxpayer was a ,united ,states shareholder of such corporation4 7,c7 ,specified ,e,p deficit ,the term specified ,e,p deficit means1 with respect to any ,e,p deficit foreign corporation1 the amount of the deficit referred to in subparagraph 7,b74 7#d7 ,netting among ,united ,states shareholders in same affiliated group 7,a7 ,in general ,in the case of any affiliated group which includes at least one ,e,p net surplus shareholder and one ,e,p net deficit shareholder1 the amount which would 7but for this paragraph7 be taken into account under section #iea7;a77#a7 by reason of subsection 7a7 by each such ,e,p net surplus shareholder shall be reduced 7but not below zero7 by such shareholder's applicable share of the affiliated group's aggregate unused ,e,p deficit4 7,b7 ,e,p net surplus shareholder ,for purposes of this paragraph1 the term ,e,p net surplus shareholder means any ,united ,states shareholder which would 7determined without regard to this paragraph7 take into account an amount greater than zero under section #iea7;a77#a7 by reason of subsection 7a74 7,c7 ,e,p net deficit shareholder ,for purposes of this paragraph1 the term ,e,p net deficit shareholder means any ,united ,states shareholder if-- 7i7 the aggregate foreign ,e,p deficit with respect to such shareholder 7as defined in paragraph 7#c77;,a771 exceeds 7ii7 the amount which would 7but for this subsection7 be taken into account by such shareholder under section #iea7;a77#a7 by reason of subsection 7a74 7,d7 ,aggregate unused ,e,p deficit ,for purposes of this paragraph-- 7i7 ,in general ,the term aggregate unused ,e,p deficit means1 with respect to any affiliated group1 the lesser of-- 7,i7 the sum of the excesses described in subparagraph 7,c71 determined with respect to each ,e,p net deficit shareholder in such group1 or 7,,ii7 the amount determined under subparagraph 7,e77ii74 7ii7 ,reduction with respect to ,e,p net deficit shareholders which are not wholly owned by the affiliated group ,if the group ownership percentage of any ,e,p net deficit shareholder is less than #ajj percent1 the amount of the excess described in subparagraph 7,c7 which is taken into account under clause 7i77,i7 with respect to such ,e,p net deficit shareholder shall be such group ownership percentage of such amount4 7,e7 ,applicable share ,for purposes of this paragraph1 the term applicable share means1 with respect to any ,e,p net surplus shareholder in any affiliated group1 the amount which bears the same proportion to such group's aggregate unused ,e,p deficit as-- 7i7 the product of-- 7,i7 such shareholder's group ownership percentage1 multiplied by 7,,ii7 the amount which would 7but for this paragraph7 be taken into account under section #iea7;a77#a7 by reason of subsection 7a7 by such shareholder1 bears to 7ii7 the aggregate amount determined under clause 7i7 with respect to all ,e,p net surplus shareholders in such group4 7,f7 ,group ownership percentage ,for purposes of this paragraph1 the term group ownership percentage means1 with respect to any ,united ,states shareholder in any affiliated group1 the percentage of the value of the stock of such ,united ,states shareholder which is held by other includible corporations in such affiliated group4 ,notwithstanding the preceding sentence1 the group ownership percentage of the common parent of the affiliated group is #ajj percent4 ,any term used in this subparagraph which is also used in section #aejd shall have the same meaning as when used in such section4 7c7 ,application of participation exemption to included income 7#a7 ,in general ,in the case of a ,united ,states shareholder of a deferred foreign income corporation1 there shall be allowed as a deduction for the taxable year in which an amount is included in the gross income of such ,united ,states shareholder under section #iea7;a77#a7 by reason of this section an amount equal to the sum of-- 7,a7 the ,united ,states shareholder's #g percent rate equivalent percentage of the excess 7if any7 of-- 7i7 the amount so included as gross income1 over 7ii7 the amount of such ,united ,states shareholder's aggregate foreign cash position1 plus 7,b7 the ,united ,states shareholder's #ad percent rate equivalent percentage of so much of the amount described in subparagraph 7,a77ii7 as does not exceed the amount described in subparagraph 7,a77i74 7#b7 #g and #ad percent rate equivalent percentages ,for purposes of this subsection-- 7,a7 #g percent rate equivalent percentage ,the term #g percent rate equivalent percentage means1 with respect to any ,united ,states shareholder for any taxable year1 the percentage which would result in the amount to which such percentage applies being subject to a #g percent rate of tax determined by only taking into account a deduction equal to such percentage of such amount and the highest rate of tax specified in section #aa for such taxable year4 ,in the case of any taxable year of a ,united ,states shareholder to which section #ae applies1 the highest rate of tax under section #aa before the effective date of the change in rates and the highest rate of tax under section #aa after the effective date of such change shall each be taken into account under the preceding sentence in the same proportions as the portion of such taxable year which is before and after such effective date1 respectively4 7,b7 #ad percent rate equivalent percentage ,the term #ad percent rate equivalent percentage means1 with respect to any ,united ,states shareholder for any taxable year1 the percentage determined under subparagraph 7,a7 applied by substituting #ad percent rate of tax for #g percent rate of tax4 7#c7 ,aggregate foreign cash position ,for purposes of this subsection-- 7,a7 ,in general ,the term aggregate foreign cash position means1 with respect to any ,united ,states shareholder1 one-third of the sum of-- 7i7 the aggregate of such ,united ,states shareholder's pro rata share of the cash position of each specified foreign corporation of such ,united ,states shareholder determined as of ,november #b1 #bjag1 7ii7 the aggregate described in clause 7i7 determined as of the close of the last taxable year of each such specified foreign corporation which ends before ,november #b1 #bjag1 and 7iii7 the aggregate described in clause 7i7 determined as of the close of the taxable year of each such specified foreign corporation which precedes the taxable year referred to in clause 7ii74 ,in the case of any foreign corporation which did not exist as of the determination date described in clause 7ii7 or 7iii71 this subparagraph shall be applied separately to such foreign corporation by not taking into account such clause and by substituting one-half 7#ajj percent in the case that both clauses 7ii7 and 7iii7 are disregarded7 for one-third4 7,b7 ,cash position ,for purposes of this paragraph1 the cash position of any specified foreign corporation is the sum of-- 7i7 cash held by such foreign corporation1 7ii7 the net accounts receivable of such foreign corporation1 plus 7iii7 the fair market value of the following assets held by such corporation3 7,i7 ,actively traded personal property for which there is an established financial market4 7,,ii7 ,commercial paper1 certificates of deposit1 the securities of the ,federal government and of any ,state or foreign government4 7,,iii7 ,any foreign currency4 7,,iv7 ,any obligation with a term of less than one year4 7,v7 ,any asset which the ,secretary identifies as being economically equivalent to any asset described in this subparagraph4 7,c7 ,net accounts receivable ,for purposes of this paragraph1 the term net accounts receivable means1 with respect to any specified foreign corporation1 the excess 7if any7 of-- 7i7 such corporation's accounts receivable1 over 7ii7 such corporation's accounts payable 7determined consistent with the rules of section #dfa74 7,d7 ,prevention of double counting 7i7 ,in general ,the applicable percentage of each specified cash position of a specified foreign corporation shall not be taken into account by-- 7,i7 the ,united ,states shareholder referred to in clause 7ii7 with respect to such position1 or 7,,ii7 any ,united ,states shareholder which is an includible corporation in the same affiliated group as such ,united ,states shareholder referred to in clause 7ii74 7ii7 ,specified cash position ,for purposes of this subparagraph1 the term specified cash position means-- 7,i7 amounts described in subparagraph 7,b77ii7 to the extent such amounts are receivable from another specified foreign corporation with respect to any ,united ,states shareholder1 7,,ii7 amounts described in subparagraph 7,b77iii77,i7 to the extent such amounts consist of an equity interest in another specified foreign corporation with respect to any ,united ,states shareholder1 and 7,,iii7 amounts described in subparagraph 7,b77iii77,,iv7 to the extent that another specified foreign corporation with respect to any ,united ,states shareholder is obligated to repay such amount4 7iii7 ,applicable percentage ,for purposes of this subparagraph1 the term applicable percentage means-- 7,i7 with respect to each specified cash position described in subclause 7,i7 or 7,,iii7 of clause 7ii71 the pro rata share of the ,united ,states shareholder referred to in clause 7ii7 with respect to the specified foreign corporation referred to in such clause1 and 7,,ii7 with respect to each specified cash position described in clause 7ii77,,ii71 the ratio 7expressed as a percentage and not in excess of #ajj percent7 of the ,united ,states shareholder's pro rata share of the cash position of the specified foreign corporation referred to in such clause divided by the amount of such specified cash position4 ,for purposes of this subparagraph1 a separate applicable percentage shall be determined under each of subclauses 7,i7 and 7,,ii7 with respect to each specified foreign corporation referred to in clause 7ii7 with respect to which a specified cash position is determined for the specified foreign corporation referred to in clause 7i74 7iv7 ,reduction with respect to affiliated group members not wholly owned by the affiliated group ,for purposes of clause 7i77,,ii71 in the case of an includible corporation the group ownership percentage of which is less than #ajj percent 7as determined under subsection 7b77#d77;,f771 the amount not take into account by reason of such clause shall be the group ownership percentage of such amount 7determined without regard to this clause74 7,e7 ,certain blocked assets not taken into account ,a cash position of a specified foreign corporation shall not be taken into account under subparagraph 7,a7 if such position could not 7as of the date that it would otherwise have been taken into account under clause 7i71 7ii71 or 7iii7 of subparagraph 7,a77 have been distributed by such specified foreign corporation to ,united ,states shareholders of such specified foreign corporation because of currency or other restrictions or limitations imposed under the laws of any foreign country 7within the meaning of section #ifd7;b774 7,f7 ,cash positions of certain non-corporate entities taken into account ,an entity 7other than a domestic corporation7 shall be treated as a specified foreign corporation of a ,united ,states shareholder for purposes of determining such ,united ,states shareholder's aggregate foreign cash position if any interest in such entity is held by a specified foreign corporation of such ,united ,states shareholder 7determined after application of this subparagraph7 and such entity would be a specified foreign corporation of such ,united ,states shareholder if such entity were a foreign corporation4 7,g7 ,time of certain determinations ,for purposes of this paragraph1 the determination of whether a person is a ,united ,states shareholder1 whether a person is a specified foreign corporation1 and the pro rata share of a ,united ,states shareholder with respect to a specified foreign corporation1 shall be determined as of the end of the taxable year described in subsection 7a74 7,h7 ,anti-abuse ,if the ,secretary determines that the principal purpose of any transaction was to reduce the aggregate foreign cash position taken into account under this subsection1 such transaction shall be disregarded for purposes of this subsection4 7d7 ,deferred foreign income corporation2 accumulated post-#aihf deferred foreign income ,for purposes of this section-- 7#a7 ,deferred foreign income corporation ,the term deferred foreign income corporation means1 with respect to any ,united ,states shareholder1 any specified foreign corporation of such ,united ,states shareholder which has accumulated post-#aihf deferred foreign income 7as of the date referred to in paragraph 7#a7 or 7#b7 of subsection 7a71 whichever is applicable with respect to such foreign corporation7 greater than zero4 7#b7 ,accumulated post-#aihf deferred foreign income ,the term accumulated post-#aihf deferred foreign income means the post-#aihf earnings and profits except to the extent such earnings-- 7,a7 are attributable to income of the specified foreign corporation which is effectively connected with the conduct of a trade or business within the ,united ,states and subject to tax under this chapter1 or 7,b7 if distributed1 would be excluded from the gross income of a ,united ,states shareholder under section #iei4 ,to the extent provided in regulations or other guidance prescribed by the ,secretary1 in the case of any controlled foreign corporation which has shareholders which are not ,united ,states shareholders1 accumulated post-#aihf deferred foreign income shall be appropriately reduced by amounts which would be described in subparagraph 7,b7 if such shareholders were ,united ,states shareholders4 7#c7 ,post-#aihf earnings and profits ,the term post-#aihf earnings and profits means the earnings and profits of the foreign corporation 7computed in accordance with sections #ifd7;a7 and #ihf7 accumulated in taxable years beginning after ,december #ca1 #aihf1 and determined-- 7,a7 as of the date referred to in paragraph 7#a7 or 7#b7 of subsection 7a71 whichever is applicable with respect to such foreign corporation1 7,b7 without diminution by reason of dividends distributed during the taxable year ending with or including such date1 and 7,c7 increased by the amount of any qualified deficit 7within the meaning of section #ieb7;c77#a77;,b77ii77 arising before ,january #a1 #bjah1 which is treated as a qualified deficit 7within the meaning of such section as amended by the ,tax ,cuts and ,jobs ,act7 for purposes of such foreign corporation's first taxable year beginning after ,december #ca1 #bjag4 7e7 ,specified foreign corporation 7#a7 ,in general ,for purposes of this section1 the term specified foreign corporation means-- 7,a7 any controlled foreign corporation1 and 7,b7 any foreign corporation with respect to which one or more domestic corporations is a ,united ,states shareholder 7determined without regard to section #ieh7;b77#d774 7#b7 ,application to certain foreign corporations ,for purposes of sections #iea and #ifa1 a foreign corporation described in paragraph 7#a77;,b7 shall be treated as a controlled foreign corporation solely for purposes of taking into account the subpart ,f income of such corporation under subsection 7a7 7and for purposes of applying subsection 7f774 7#c7 ,exception for passive foreign investment companies ,the term specified foreign corporation shall not include any passive foreign investment company 7within the meaning of subpart ,d of part ,,vi of subchapter ,p7 that is not a controlled foreign corporation4 7f7 ,determinations of pro rata share ,for purposes of this section1 the determination of any ,united ,states shareholder's pro rata share of any amount with respect to any specified foreign corporation shall be determined under rules similar to the rules of section #iea7;a77#b7 by treating such amount in the same manner as subpart ,f income 7and by treating such specified foreign corporation as a controlled foreign corporation74 7g7 ,disallowance of foreign tax credit1 etc 7#a7 ,in general ,no credit shall be allowed under section #ija for the applicable percentage of any taxes paid or accrued 7or treated as paid or accrued7 with respect to any amount for which a deduction is allowed under this section4 7#b7 ,applicable percentage ,for purposes of this subsection1 the term applicable percentage means the amount 7expressed as a percentage7 equal to the sum of-- 7,a7 #hj percent of the ratio of-- 7i7 the excess to which subsection 7c77#a77;,a7 applies1 divided by 7ii7 the sum of such excess plus the amount to which subsection 7c77#a77;,b7 applies1 plus 7,b7 #fj percent of the ratio of-- 7i7 the amount to which subsection 7c77#a77;,b7 applies1 divided by 7ii7 the sum described in subparagraph 7,a77ii74 7#c7 ,denial of deduction ,no deduction shall be allowed under this chapter for any tax for which credit is not allowable under section #ija by reason of paragraph 7#a7 7determined by treating the taxpayer as having elected the benefits of subpart ,a of part ,,iii of subchapter ,n74 7#d7 ,coordination with section #gh ,with respect to the taxes treated as paid or accrued by a domestic corporation with respect to amounts which are includible in gross income of such domestic corporation by reason of this section1 section #gh shall apply only to so much of such taxes as bears the same proportion to the amount of such taxes as-- 7,a7 the excess of-- 7i7 the amounts which are includible in gross income of such domestic corporation by reason of this section1 over 7ii7 the deduction allowable under subsection 7c7 with respect to such amounts1 bears to 7,b7 such amounts4 7#e7 ,extension of foreign tax credit carryover period ,with respect to any taxes paid or accrued 7or treated as paid or accrued7 with respect to any amount for which a deduction is allowed under this section1 section #ijd7;c7 shall be applied by substituting first #bj succeeding taxable years for first #aj succeeding taxable years4 7h7 ,election to pay liability in installments 7#a7 ,in general ,in the case of a ,united ,states shareholder of a deferred foreign income corporation1 such ,united ,states shareholder may elect to pay the net tax liability under this section in #h equal installments4 7#b7 ,date for payment of installments ,if an election is made under paragraph 7#a71 the first installment shall be paid on the due date 7determined without regard to any extension of time for filing the return7 for the return of tax for the taxable year described in subsection 7a7 and each succeeding installment shall be paid on the due date 7as so determined7 for the return of tax for the taxable year following the taxable year with respect to which the preceding installment was made4 7#c7 ,acceleration of payment ,if there is an addition to tax for failure to timely pay any installment required under this subsection1 a liquidation or sale of substantially all the assets of the taxpayer 7including in a title #aa or similar case71 a cessation of business by the taxpayer1 or any similar circumstance1 then the unpaid portion of all remaining installments shall be due on the date of such event 7or in the case of a title #aa or similar case1 the day before the petition is filed74 ,the preceding sentence shall not apply to the sale of substantially all the assets of a taxpayer to a buyer if such buyer enters into an agreement with the ,secretary under which such buyer is liable for the remaining installments due under this subsection in the same manner as if such buyer were the taxpayer4 7#d7 ,proration of deficiency to installments ,if an election is made under paragraph 7#a7 to pay the net tax liability under this section in installments and a deficiency has been assessed with respect to such net tax liability1 the deficiency shall be prorated to the installments payable under paragraph 7#a74 ,the part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as1 and as a part of1 such installment4 ,the part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the ,secretary4 ,this subsection shall not apply if the deficiency is due to negligence1 to intentional disregard of rules and regulations1 or to fraud with intent to evade tax4 7#e7 ,election ,any election under paragraph 7#a7 shall be made not later than the due date for the return of tax for the taxable year described in subsection 7a7 and shall be made in such manner as the ,secretary may provide4 7#f7 ,net tax liability under this section ,for purposes of this subsection-- 7,a7 ,in general ,the net tax liability under this section with respect to any ,united ,states shareholder is the excess 7if any7 of-- 7i7 such taxpayer's net income tax for the taxable year in which an amount is included in the gross income of such ,united ,states shareholder under section #iea7;a77#a7 by reason of this section1 over 7ii7 such taxpayer's net income tax for such taxable year determined-- 7,i7 without regard to this section1 and 7,,ii7 without regard to any income1 deduction1 or credit1 properly attributable to a dividend received by such ,united ,states shareholder from any deferred foreign income corporation4 7,b7 ,net income tax ,the term net income tax means the regular tax liability reduced by the credits allowed under subparts ,a1 ,b1 and ,d of part ,,iv of subchapter ,a4 7i7 ,special rules for ,s corporation shareholders 7#a7 ,in general ,in the case of any ,s corporation which is a ,united ,states shareholder of a deferred foreign income corporation1 each shareholder of such ,s corporation may elect to defer payment of such shareholder's net tax liability under this section with respect to such ,s corporation until the shareholder's taxable year which includes the triggering event with respect to such liability4 ,any net tax liability payment of which is deferred under the preceding sentence shall be assessed on the return as an addition to tax in the shareholder's taxable year which includes such triggering event4 7#b7 ,triggering event 7,a7 ,in general ,in the case of any shareholder's net tax liability under this section with respect to any ,s corporation1 the triggering event with respect to such liability is whichever of the following occurs first3 7i7 ,such corporation ceases to be an ,s corporation 7determined as of the first day of the first taxable year that such corporation is not an ,s corporation74 7ii7 ,a liquidation or sale of substantially all the assets of such ,s corporation 7including in a title #aa or similar case71 a cessation of business by such ,s corporation1 such ,s corporation ceases to exist1 or any similar circumstance4 7iii7 ,a transfer of any share of stock in such ,s corporation by the taxpayer 7including by reason of death1 or otherwise74 7,b7 ,partial transfers of stock ,in the case of a transfer of less than all of the taxpayer's shares of stock in the ,s corporation1 such transfer shall only be a triggering event with respect to so much of the taxpayer's net tax liability under this section with respect to such ,s corporation as is properly allocable to such stock4 7,c7 ,transfer of liability ,a transfer described in clause 7iii7 shall not be treated as a triggering event if the transferee enters into an agreement with the ,secretary under which such transferee is liable for net tax liability with respect to such stock in the same manner as if such transferee were the taxpayer4 7#c7 ,net tax liability ,a shareholder's net tax liability under this section with respect to any ,s corporation is the net tax liability under this section which would be determined under subsection 7h77#f7 if the only subpart ,f income taken into account by such shareholder by reason of this section were allocations from such ,s corporation4 7#d7 ,election to pay deferred liability in installments ,in the case of a taxpayer which elects to defer payment under paragraph 7#a7-- 7,a7 subsection 7h7 shall be applied separately with respect to the liability to which such election applies1 7,b7 an election under subsection 7h7 with respect to such liability shall be treated as timely made if made not later than the due date for the return of tax for the taxable year in which the triggering event with respect to such liability occurs1 7,c7 the first installment under subsection 7h7 with respect to such liability shall be paid not later than such due date 7but determined without regard to any extension of time for filing the return71 and 7,d7 if the triggering event with respect to any net tax liability is described in paragraph 7#b77;,a77ii71 an election under subsection 7h7 with respect to such liability may be made only with the consent of the ,secretary4 7#e7 ,joint and several liability of ,s corporation ,if any shareholder of an ,s corporation elects to defer payment under paragraph 7#a71 such ,s corporation shall be jointly and severally liable for such payment and any penalty1 addition to tax1 or additional amount attributable thereto4 7#f7 ,extension of limitation on collection ,notwithstanding any other provision of law1 any limitation on the time period for the collection of a liability deferred under this subsection shall not be treated as beginning before the date of the triggering event with respect to such liability4 7#g7 ,annual reporting of net tax liability 7,a7 ,in general ,any shareholder of an ,s corporation which makes an election under paragraph 7#a7 shall report the amount of such shareholder's deferred net tax liability on such shareholder's return of tax for the taxable year for which such election is made and on the return of tax for each taxable year thereafter until such amount has been fully assessed on such returns4 7,b7 ,deferred net tax liability ,for purposes of this paragraph1 the term deferred net tax liability means1 with respect to any taxable year1 the amount of net tax liability payment of which has been deferred under paragraph 7#a7 and which has not been assessed on a return of tax for any prior taxable year4 7,c7 ,failure to report ,in the case of any failure to report any amount required to be reported under subparagraph 7,a7 with respect to any taxable year before the due date for the return of tax for such taxable year1 there shall be assessed on such return as an addition to tax #e percent of such amount4 7#h7 ,election ,any election under paragraph 7#a7-- 7,a7 shall be made by the shareholder of the ,s corporation not later than the due date for such shareholder's return of tax for the taxable year which includes the close of the taxable year of such ,s corporation in which the amount described in subsection 7a7 is taken into account1 and 7,b7 shall be made in such manner as the ,secretary may provide4 7j7 ,reporting by ,s corporation ,each ,s corporation which is a ,united ,states shareholder of a deferred foreign income corporation shall report in its return of tax under section #fjcg7;a7 the amount includible in its gross income for such taxable year by reason of this section and the amount of the deduction allowable by subsection 7c74 ,any copy provided to a shareholder under section #fjcg7;b7 shall include a statement of such shareholder's pro rata share of such amounts4 7k7 ,inclusion of deferred foreign income under this section not to trigger recapture of overall foreign loss1 etc ,for purposes of sections #ijd7;f77#a7 and #ijg7;c77#d71 in the case of a ,united ,states shareholder of a deferred foreign income corporation1 such ,united ,states shareholder's taxable income from sources without the ,united ,states and combined foreign oil and gas income shall be determined without regard to this section4 7l7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section4 4 7b7 ,clerical amendment ,the table of sections for subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #ife and inserting the following3 ,sec4 #ife4 ,treatment of deferred foreign income upon transition to participation exemption system of taxation4 4 ,b ,modifications related to foreign tax credit system #daja4 ,repeal of section #ijb indirect foreign tax credits2 determination of section #ifj credit on current year basis 7a7 ,repeal of section #ijb indirect foreign tax credits ,subpart ,a of part ,,iii of subchapter ,n of chapter #a is amended by striking section #ijb4 7b7 ,determination of section #ifj credit on current year basis ,section #ifj is amended-- 7#a7 by striking subsection 7c71 by redesignating subsection 7b7 as subsection 7c71 by striking all that precedes subsection 7c7 7as so redesignated7 and inserting the following3 #ifj4 ,deemed paid credit for subpart ,f inclusions 7a7 ,in general ,for purposes of this subpart1 if there is included in the gross income of a domestic corporation any item of income under section #iea7;a77#a7 with respect to any controlled foreign corporation with respect to which such domestic corporation is a ,united ,states shareholder1 such domestic corporation shall be deemed to have paid so much of such foreign corporation's foreign income taxes as are properly attributable to such item of income4 7b7 ,special rules for distributions from previously taxed earnings and profits ,for purposes of this subpart-- 7#a7 ,in general ,if any portion of a distribution from a controlled foreign corporation to a domestic corporation which is a ,united ,states shareholder with respect to such controlled foreign corporation is excluded from gross income under section #iei7;a71 such domestic corporation shall be deemed to have paid so much of such foreign corporation's foreign income taxes as-- 7,a7 are properly attributable to such portion1 and 7,b7 have not been deemed to have to been paid by such domestic corporation under this section for the taxable year or any prior taxable year4 7#b7 ,tiered controlled foreign corporations ,if section #iei7;b7 applies to any portion of a distribution from a controlled foreign corporation to another controlled foreign corporation1 such controlled foreign corporation shall be deemed to have paid so much of such other controlled foreign corporation's foreign income taxes as-- 7,a7 are properly attributable to such portion1 and 7,b7 have not been deemed to have been paid by a domestic corporation under this section for the taxable year or any prior taxable year4 1 7#b7 and by adding after subsection 7c7 7as so redesignated7 the following new subsections3 7d7 ,foreign income taxes ,the term foreign income taxes means any income1 war profits1 or excess profits taxes paid or accrued to any foreign country or possession of the ,united ,states4 7e7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section4 4 7c7 ,conforming amendments 7#a7 ,section #gh is amended to read as follows3 #gh4 ,gross up for deemed paid foreign tax credit ,if a domestic corporation chooses to have the benefits of subpart ,a of part ,,iii of subchapter ,n 7relating to foreign tax credit7 for any taxable year1 an amount equal to the taxes deemed to be paid by such corporation under subsections 7a7 and 7b7 of section #ifj for such taxable year shall be treated for purposes of this title 7other than sections #iei1 #ifj1 and #ifa7 as an item of income required to be included in the gross income of such domestic corporation under section #iea7;a7 for such taxable year4 4 7#b7 ,section #bde7;a77#aj77;,c7 is amended by striking sections #ijb1 #ijg1 and #ifj and inserting sections #ijg and #ifj4 7#c7 ,sections #ece7;b77#a7 and #ede7;b77#a7 are each amended by striking section #ijb7;a7 or #ifj7;a77#a7 and inserting section #ifj4 7#d7 ,section #had7;f77#a7 is amended-- 7,a7 by striking subparagraph 7,b71 and 7,b7 by striking all that precedes ,no income and inserting the following3 7#a7 ,treatment of foreign taxes 4 7#e7 ,section #hfe7;h77#a77;,b7 is amended by striking sections #ijb1 #ijg1 and #ifj and inserting sections #ijg and #ifj4 7#f7 ,section #ija7;a7 is amended by striking sections #ijb and #ifj and inserting section #ifj4 7#g7 ,section #ija7;e77#b7 is amended by striking but is not limited to-- and all that follows through that portion and inserting but is not limited to1 that portion4 7#h7 ,section #ija7;f7 is amended by striking sections #ijb and #ifj and inserting section #ifj4 7#i7 ,section #ija7;j77#a77;,a7 is amended by striking #ijb or4 7#aj7 ,section #ija7;j77#a77;,b7 is amended by striking sections #ijb and #ifj and inserting section #ifj4 7#aa7 ,section #ija7k77#b7 is amended by striking section #hec1 #ijb1 or #ifj and inserting section #hec or #ifj4 7#ab7 ,section #ija7k77#f7 is amended by striking #ijb or4 7#ac7 ,section #ija7m77#a7 is amended by striking relevant foreign assets-- and all that follows and inserting relevant foreign assets shall not be taken into account in determining the credit allowed under subsection 7a744 7#ad7 ,section #ijd7;d77#a7 is amended by striking sections #ijb1 #ijg1 and #ifj and inserting sections #ijg and #ifj4 7#ae7 ,section #ijd7;d77#f77;,a7 is amended by striking sections #ijb1 #ijg1 and #ifj and inserting sections #ijg and #ifj4 7#af7 ,section #ijd7;h77#aj77;,a7 is amended by striking sections #ijb1 #ijg1 and #ifj and inserting sections #ijg and #ifj4 7#ag7 ,section #ijd is amended by striking subsection 7k74 7#ah7 ,section #ije7;c77#a7 is amended by striking the last sentence4 7#ai7 ,section #ije7;c77#b77;,b77i7 is amended to read as follows3 7i7 shall be taken into account for the taxable year to which such taxes relate1 and 4 7#bj7 ,section #ijf7;a7 is amended by striking 7or deemed1 under section #ijb1 paid or accrued during the taxable year74 7#ba7 ,section #ijf7;b7 is amended by striking paragraphs 7#d7 and 7#e74 7#bb7 ,section #ijg7;b77#b77;,b7 is amended by striking #ijb or4 7#bc7 ,section #ijg7;c77#c7 is amended-- 7,a7 by striking subparagraph 7,a7 and redesignating subparagraphs 7,b7 and 7,c7 as subparagraphs 7,a7 and 7,b71 respectively1 and 7,b7 by striking section #ifj7;a7 in subparagraph 7,a7 7as so redesignated7 and inserting section #ifj4 7#bd7 ,section #ijg7;c77#e7 is amended by striking #ijb or4 7#be7 ,section #ijg7;f77#b77;,b77i7 is amended by striking #ijb or4 7#bf7 ,section #ijh7;a7 is amended by striking #ijb or4 7#bg7 ,section #iji7;b7 is amended-- 7,a7 by striking section #ijb corporation in the matter preceding paragraph 7#a7 and inserting #aj_/ej corporation1 7,b7 by striking #ijb or in paragraph 7#a71 7,c7 by striking by such section #ijb corporation and all that follows in the matter following paragraph 7#b7 and inserting by such #aj_/ej corporation or a domestic corporation which is a ,united ,states shareholder with respect to such #aj_/ej corporation41 and 7,d7 by striking section #ijb corporations in the heading thereof and inserting #aj_/ej corporations4 7#bh7 ,section #iji7;d77#e7 is amended to read as follows3 7#e7 #aj_/ej corporation ,the term #aj_/ej corporation means any foreign corporation with respect to which one or more domestic corporations is a ,united ,states shareholder4 4 7#bi7 ,section #ieh7;a77#a7 is amended by striking #ifj7;a77#a7 and inserting #ifj4 7#cj7 ,section #iei7;d7 is amended by striking ,except as provided in section #ifj7;a77#c71 any and inserting ,any4 7#ca7 ,section #iei7;e7 is amended by striking section #ifj7;b7 and inserting section #ifj7;c74 7#cb7 ,section #abia7;g77#b77;,a7 is amended by striking any distribution-- and all that follows through but only if and inserting any distribution1 any withholding tax imposed with respect to such distribution1 but only if4 7#cc7 ,section #fjch7;c77#a77;,b7 is amended by striking sections #ijb 7relating to foreign tax credit for corporate stockholder in foreign corporation7 and #ifj 7relating to special rules for foreign tax credit7 and inserting section #ifj4 7#cd7 ,section #fjch7;c77#d7 is amended by striking subparagraph 7,c74 7#ce7 ,the table of sections for subpart ,a of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #ijb4 7#cf7 ,the table of sections for subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #ifj and inserting the following3 ,sec4 #ifj4 ,deemed paid credit for subpart ,f inclusions4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #dajb4 ,source of income from sales of inventory determined solely on basis of production activities 7a7 ,in general ,section #hfc7;b7 is amended by adding at the end the following3 ,gains1 profits1 and income from the sale or exchange of inventory property described in paragraph 7#b7 shall be allocated and apportioned between sources within and without the ,united ,states solely on the basis of the production activities with respect to the property44 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,c ,modification of subpart ,f provisions #dbja4 ,repeal of inclusion based on withdrawal of previously excluded subpart ,f income from qualified investment 7a7 ,in general ,subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by striking section #iee4 7b7 ,conforming amendments 7#a7 7,a7 ,section #iea7;a77#a77;,a7 is amended to read as follows3 7,a7 his pro rata share 7determined under paragraph 7#b77 of the corporation's subpart ,f income for such year1 and 4 7,b7 ,section #hea7;b77#c7 is amended by striking section #iea7;a77#a77;,a77i7 in the flush language at the end and inserting section #iea7;a77#a77;,a74 7,c7 ,section #ieb7;c77#a77;,b77i7 is amended by striking section #iea7;a77#a77;,a77i7 and inserting section #iea7;a77#a77;,a74 7,d7 ,section #iec7;c77#a77;,c7 is amended by striking section #iea7;a77#a77;,a77i7 and inserting section #iea7;a77#a77;,a74 7#b7 ,section #iea7;a7 is amended by striking paragraph 7#c74 7#c7 ,section #iec7;d77#d77;,b77iv77,,ii7 is amended by striking or amounts referred to in clause 7ii7 or 7iii7 of section #iea7;a77#a77;,a74 7#d7 ,section #ifd7;b7 is amended by striking 1 #iee14 7#e7 ,section #igj is amended by striking subsection 7b74 7#f7 ,the table of sections for subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #iee4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjag1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dbjb4 ,repeal of treatment of foreign base company oil related income as subpart ,f income 7a7 ,in general ,section #ied7;a7 is amended by striking paragraph 7#e71 by striking the comma at the end of paragraph 7#c7 and inserting a period1 and by inserting and at the end of paragraph 7#b74 7b7 ,conforming amendments 7#a7 ,section #ieb7;c77#a77;,b77iii7 is amended by striking subclause 7,i7 and by redesignating subclauses 7,,ii7 through 7,v7 as subclauses 7,i7 through 7,,iv71 respectively4 7#b7 ,section #ied7;b77#d7 is amended by striking the last sentence4 7#c7 ,section #ied7;b77#e7 is amended by striking the foreign base company services income1 and the foreign base company oil related income and inserting and the foreign base company services income4 7#d7 ,section #ied7;b7 is amended by striking paragraph 7#f74 7#e7 ,section #ied is amended by striking subsection 7g74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjag1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dbjc4 ,inflation adjustment of de minimis exception for foreign base company income 7a7 ,in general ,section #ied7;b77#c7 is amended by adding at the end the following new subparagraph3 7,d7 ,inflation adjustment ,in the case of any taxable year beginning after #bjag1 the dollar amount in subparagraph 7,a77ii7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;c77#b77;,a7 for the calendar year in which the taxable year begins4 ,any increase determined under the preceding sentence shall be rounded to the nearest multiple of #ej1jjj4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjag1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dbjd4 ,look-thru rule for related controlled foreign corporations made permanent 7a7 ,in general ,paragraph 7#f7 of section #ied7;c7 is amended by striking subparagraph 7,c74 7b7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjai1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dbje4 ,modification of stock attribution rules for determining status as a controlled foreign corporation 7a7 ,in general ,section #ieh7;b7 is amended-- 7#a7 by striking paragraph 7#d71 and 7#b7 by striking ,paragraphs 7#a7 and 7#d7 in the last sentence and inserting ,paragraph 7#a74 7b7 ,application of certain reporting requirements ,section #fjch7;e77#b7 is amended by striking except that-- and all that follows through in applying subparagraph 7,c7 and inserting except that in applying subparagraph 7,c74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjag1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dbjf4 ,elimination of requirement that corporation must be controlled for #cj days before subpart ,f inclusions apply 7a7 ,in general ,section #iea7;a77#a7 is amended by striking for an uninterrupted period of #cj days or more and inserting at any time4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjag1 and to taxable years of ,united ,states shareholders with or within which such taxable years of foreign corporations end4 ,d ,prevention of base erosion #dcja4 ,current year inclusion by ,united ,states shareholders with foreign high returns 7a7 ,in general ,subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by inserting after section #iea the following new section3 #iea;,a4 ,foreign high return amount included in gross income of ,united ,states shareholders 7a7 ,in general ,each person who is a ,united ,states shareholder of any controlled foreign corporation for any taxable year of such ,united ,states shareholder shall include in gross income for such taxable year #ej percent of such shareholder's foreign high return amount for such taxable year4 7b7 ,foreign high return amount ,for purposes of this section-- 7#a7 ,in general ,the term foreign high return amount means1 with respect to any ,united ,states shareholder for any taxable year of such ,united ,states shareholder1 the excess 7if any7 of-- 7,a7 such shareholder's net ,,cfc tested income for such taxable year1 over 7,b7 the excess 7if any7 of-- 7i7 the applicable percentage of the aggregate of such shareholder's pro rata share of the qualified business asset investment of each controlled foreign corporation with respect to which such shareholder is a ,united ,states shareholder for such taxable year 7determined for each taxable year of each such controlled foreign corporation which ends in or with such taxable year of such ,united ,states shareholder71 over 7ii7 the amount of interest expense taken into account under subsection 7c77#b77;,a77ii7 in determining the shareholder's net ,,cfc tested income for the taxable year4 7#b7 ,applicable percentage ,the term applicable percentage means1 with respect to any taxable year1 the ,federal short-term rate 7determined under section #abgd7;d7 for the month in which or with which such taxable year ends7 plus #g percentage points4 7c7 ,net ,,cfc tested income ,for purposes of this section-- 7#a7 ,in general ,the term net ,,cfc tested income means1 with respect to any ,united ,states shareholder for any taxable year of such ,united ,states shareholder1 the excess 7if any7 of-- 7,a7 the aggregate of such shareholder's pro rata share of the tested income of each controlled foreign corporation with respect to which such shareholder is a ,united ,states shareholder for such taxable year of such ,united ,states shareholder 7determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such ,united ,states shareholder71 over 7,b7 the aggregate of such shareholder's pro rata share of the tested loss of each controlled foreign corporation with respect to which such shareholder is a ,united ,states shareholder for such taxable year of such ,united ,states shareholder 7determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such ,united ,states shareholder74 7#b7 ,tested income2 tested loss ,for purposes of this section-- 7,a7 ,tested income ,the term tested income means1 with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation1 the excess 7if any7 of-- 7i7 the gross income of such corporation determined without regard to-- 7,i7 any item of income which is effectively connected with the conduct by such corporation of a trade or business within the ,united ,states if subject to tax under this chapter1 7,,ii7 any gross income taken into account in determining the subpart ,f income of such corporation1 7,,iii7 except as otherwise provided by the ,secretary1 any amount excluded from the foreign personal holding company income 7as defined in section #ied7 of such corporation by reason of section #ied7;c77#f7 but only to the extent that any deduction allowable for the payment or accrual of such amount does not result in a reduction in the foreign high return amount of any ,united ,states shareholder 7determined without regard to this subclause71 7,,iv7 any gross income excluded from the foreign personal holding company income 7as defined in section #ied7 of such corporation by reason of subsection 7c77#b77;,c71 7h71 or 7i7 of section #ied1 7,v7 any gross income excluded from the insurance income 7as defined in section #iec7 of such corporation by reason of section #iec7;a77#b71 7,,vi7 any gross income excluded from foreign base company income 7as defined in section #ied7 or insurance income 7as defined in section #iec7 of such corporation by reason of section #ied7;b77#d71 7,,vii7 any dividend received from a related person 7as defined in section #ied7;d77#c771 and 7,,viii7 any commodities gross income of such corporation1 over 7ii7 the deductions 7including taxes7 properly allocable to such gross income under rules similar to the rules of section #ied7;b77#e7 7or which would be so properly allocable if such corporation had such gross income74 7,b7 ,tested loss ,the term tested loss means1 with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation1 the excess 7if any7 of the amount described in subparagraph 7,a77ii7 over the amount described in subparagraph 7,a77i74 7d7 ,qualified business asset investment ,for purposes of this section-- 7#a7 ,in general ,the term qualified business asset investment means1 with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation1 the aggregate of the corporation's adjusted bases 7determined as of the close of such taxable year and after any adjustments with respect to such taxable year7 in specified tangible property-- 7,a7 used in a trade or business of the corporation1 and 7,b7 of a type with respect to which a deduction is allowable under section #afh4 7#b7 ,specified tangible property ,the term specified tangible property means any tangible property to the extent such property is used in the production of tested income or tested loss4 7#c7 ,partnership property ,for purposes of this subsection1 if a controlled foreign corporation holds an interest in a partnership at the close of such taxable year of the controlled foreign corporation1 such controlled foreign corporation shall take into account under paragraph 7#a7 the controlled foreign corporation's distributive share of the aggregate of the partnership's adjusted bases 7determined as of such date in the hands of the partnership7 in tangible property held by such partnership to the extent such property-- 7,a7 is used in the trade or business of the partnership1 7,b7 is of a type with respect to which a deduction is allowable under section #afh1 and 7,c7 is used in the production of tested income or tested loss 7determined with respect to such controlled foreign corporation's distributive share of income or loss with respect to such property74 ,for purposes of this paragraph1 the controlled foreign corporation's distributive share of the adjusted basis of any property shall be the controlled foreign corporation's distributive share of income and loss with respect to such property4 7#d7 ,determination of adjusted basis ,for purposes of this subsection1 the adjusted basis in any property shall be determined without regard to any provision of this title 7or any other provision of law7 which is enacted after the date of the enactment of this section4 7#e7 ,regulations ,the ,secretary shall issue such regulations or other guidance as the ,secretary determines appropriate to prevent the avoidance of the purposes of this subsection1 including regulations or other guidance which provide for the treatment of property if-- 7,a7 such property is transferred1 or held1 temporarily1 or 7,b7 the avoidance of the purposes of this paragraph is a factor in the transfer or holding of such property4 7e7 ,commodities gross income ,for purposes of this section-- 7#a7 ,commodities gross income ,the term commodities gross income means1 with respect to any corporation-- 7,a7 gross income of such corporation from the disposition of commodities which are produced or extracted by such corporation 7or a partnership in which such corporation is a partner71 and 7,b7 gross income of such corporation from the disposition of property which gives rise to income described in subparagraph 7,a74 7#b7 ,commodity ,the term commodity means any commodity described in section #dge7;e77#b77;,a7 or section #dge7;e77#b77;,d7 7determined without regard to clause 7i7 thereof and by substituting a commodity described in subparagraph 7,a7 for such a commodity in clause 7ii7 thereof74 7f7 ,taxable years for which persons are treated as ,united ,states shareholders of controlled foreign corporations ,for purposes of this section-- 7#a7 ,in general ,a ,united ,states shareholder of a controlled foreign corporation shall be treated as a ,united ,states shareholder of such controlled foreign corporation for any taxable year of such ,united ,states shareholder if-- 7,a7 a taxable year of such controlled foreign corporation ends in or with such taxable year of such person1 and 7,b7 such person owns 7within the meaning of section #ieh7;a77 stock in such controlled foreign corporation on the last day1 in such taxable year of such foreign corporation1 on which the foreign corporation is a controlled foreign corporation4 7#b7 ,treatment as a controlled foreign corporation ,except for purposes of paragraph 7#a77;,b7 and the application of section #iea7;a77#b7 to this section pursuant to subsection 7g71 a foreign corporation shall be treated as a controlled foreign corporation for any taxable year of such foreign corporation if such foreign corporation is a controlled foreign corporation at any time during such taxable year4 7g7 ,determination of pro rata share ,for purposes of this section1 pro rata shares shall be determined under the rules of section #iea7;a77#b7 in the same manner as such section applies to subpart ,f income4 7h7 ,coordination with subpart ,f 7#a7 ,treatment as subpart ,f income for certain purposes ,except as otherwise provided by the ,secretary any foreign high return amount included in gross income under subsection 7a7 shall be treated in the same manner as an amount included under section #iea7;a77#a77;,a7 for purposes of applying sections #afh7;h77#b77;,b71 #ece7;b77#aj71 #hea7;b71 #ijd7;h77#a71 #iei1 #ifa1 #ifb1 #iic7;a77#a77;,e71 #iif7;f77#a71 #abdh7;b77#a71 #abdh7;d77#a71 #feja7;e77#a77;,c71 #ffed7;d77#b77;,d71 and #ffee7;e77#d74 7#b7 ,entire foreign high return amount taken into account for purposes of certain sections ,for purposes of applying paragraph 7#a7 with respect to sections #afh7;h77#b77;,b71 #hea7;b71 #iei1 #ifa1 #ifb1 #abdh7;b77#a71 and #abdh7;d77#a71 the foreign high return amount included in gross income under subsection 7a7 shall be determined by substituting #ajj percent for #ej percent in such subsection4 7#c7 ,allocation of foreign high return amount to controlled foreign corporations ,for purposes of the sections referred to in paragraph 7#a71 with respect to any controlled foreign corporation any pro rata amount from which is taken into account in determining the foreign high return amount included in gross income of a ,united ,states shareholder under subsection 7a71 the portion of such foreign high return amount which is treated as being with respect to such controlled foreign corporation is-- 7,a7 in the case of a controlled foreign corporation with tested loss1 zero1 and 7,b7 in the case of a controlled foreign corporation with tested income1 the portion of such foreign high return amount which bears the same ratio to such foreign high return amount as-- 7i7 such ,united ,states shareholder's pro rata amount of the tested income of such controlled foreign corporation1 bears to 7ii7 the aggregate amount determined under subsection 7c77#a77;,a7 with respect to such ,united ,states shareholder4 7#d7 ,coordination with subpart ,f to deny double benefit of losses ,in the case of any ,united ,states shareholder of any controlled foreign corporation1 the amount included in gross income under section #iea7;a77#a77;,a7 shall be determined by increasing the earnings and profits of such controlled foreign corporation 7solely for purposes of determining such amount7 by an amount that bears the same ratio 7not greater than #a7 to such shareholder's pro rata share of the tested loss of such controlled foreign corporation as-- 7,a7 the aggregate amount determined under subsection 7c77#a77;,a7 with respect to such shareholder1 bears to 7,b7 the aggregate amount determined under subsection 7c77#a77;,b7 with respect to such shareholder4 4 7b7 ,foreign tax credit 7#a7 ,application of deemed paid foreign tax credit ,section #ifj1 as amended by the preceding provisions of this ,act1 is amended by redesignating subsections 7d7 and 7e7 as subsections 7e7 and 7f71 respectively1 and by inserting after subsection 7c7 the following new subsection3 7d7 ,deemed paid credit for taxes properly attributable to tested income 7#a7 ,in general ,for purposes of this subpart1 if any amount is includible in the gross income of a domestic corporation under section #iea;,a1 such domestic corporation shall be deemed to have paid foreign income taxes equal to #hj percent of-- 7,a7 such domestic corporation's foreign high return percentage1 multiplied by 7,b7 the aggregate tested foreign income taxes paid or accrued by controlled foreign corporations with respect to which such domestic corporation is a ,united ,states shareholder4 7#b7 ,foreign high return percentage ,for purposes of paragraph 7#a71 the term foreign high return percentage means1 with respect to any domestic corporation1 the ratio 7expressed as a percentage7 of-- 7,a7 such corporation's foreign high return amount 7as defined in section #iea;,a7b771 divided by 7,b7 the aggregate amount determined under section #iea;,a7c77#a77;,a7 with respect to such corporation4 7#c7 ,tested foreign income taxes ,for purposes of paragraph 7#a71 the term tested foreign income taxes means1 with respect to any domestic corporation which is a ,united ,states shareholder of a controlled foreign corporation1 the foreign income taxes paid or accrued by such foreign corporation which are properly attributable to gross income described in section #iea;,a7c77#b77;,a77i74 4 7#b7 ,application of foreign tax credit limitation 7,a7 ,separate basket for foreign high return amount ,section #ijd7;d77#a7 is amended by redesignating subparagraphs 7,a7 and 7,b7 as subparagraphs 7,b7 and 7,c71 respectively1 and by inserting before subparagraph 7,b7 7as so redesignated7 the following new subparagraph3 7,a7 any amount includible in gross income under section #iea;,a1 4 7,b7 ,no carryover of excess taxes ,section #ijd7;c7 is amended by adding at the end the following3 ,this subsection shall not apply to taxes paid or accrued with respect to amounts described in subsection 7d77#a77;,a74 7#c7 ,gross up for deemed paid foreign tax credit ,section #gh1 as amended by the preceding provisions of this ,act1 is amended-- 7,a7 by striking any taxable year1 an amount and inserting any taxable year-- 7#a7 an amount 1 and 7,b7 by striking the period at the end and inserting 1 and 7#b7 an amount equal to the taxes deemed to be paid by such corporation under section #ifj7;d7 for such taxable year 7determined by substituting #ajj percent for #hj percent in such section7 shall be treated for purposes of this title 7other than sections #iei1 #ifj1 and #ifa7 as an increase in the foreign high return amount of such domestic corporation under section #iea;,a for such taxable year4 4 7c7 ,conforming amendments 7#a7 ,section #agj7;b77#b77;,d7 is amended by striking computed without regard to and all that follows and inserting computed-- 7i7 without regard to-- 7,i7 this section1 7,,ii7 part ,,viii 7except section #bdh71 7,,iii7 any net operating loss carryback to the taxable year under section #agb1 7,,iv7 any capital loss carryback to the taxable year under section #abab7;a77#a71 and 7ii7 by substituting #ajj percent for #ej percent in section #iea;,a7a74 4 7#b7 ,section #bdf7;b77#a7 is amended by-- 7,a7 striking and without regard to and inserting without regard to1 and 7,b7 by striking the period at the end and inserting 1 and by substituting #ajj percent for #ej percent in section #iea;,a7a744 7#c7 ,section #dfi7;i77#c77;,f7 is amended by striking determined without regard to and all that follows and inserting determined-- 7i7 without regard to-- 7,i7 any amount includible in gross income under section #hf1 7,,ii7 the amounts allowable as a deduction under section #bai1 and 7,,iii7 any passive activity loss or any loss allowable by reason of subsection 7c77#g71 and 7ii7 by substituting #ajj percent for #ej percent in section #iea;,a7a74 4 7#d7 ,section #hef7;c77#b7 is amended by striking and at the end of subparagraph 7,h71 by adding and at the end of subparagraph 7,i71 and by inserting after subparagraph 7,i7 the following new subparagraph3 7,j7 amounts includible in gross income under section #iea;,a7a72 4 7#e7 ,section #hef7;c77#c77;,d7 is amended by striking dividends or other distributions on1 and gain and inserting dividends1 other distributions on1 amounts includible in gross income under section #iea;,a7a7 with respect to1 and gain4 7#f7 ,the table of sections for subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by inserting after the item relating to section #iea the following new item3 ,sec4 #iea;,a4 ,foreign high return amount included in gross income of ,united ,states shareholders4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjag1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #dcjb4 ,limitation on deduction of interest by domestic corporations which are members of an international financial reporting group 7a7 ,in general ,section #afc is amended by redesignating subsection 7n7 as subsection 7p7 and by inserting after subsection 7m7 the following new subsection3 7n7 ,limitation on deduction of interest by domestic corporations in international financial reporting groups 7#a7 ,in general ,in the case of any domestic corporation which is a member of any international financial reporting group1 the deduction under this chapter for interest paid or accrued during the taxable year shall not exceed the sum of-- 7,a7 the allowable percentage of #aaj percent of the excess 7if any7 of -- 7i7 the amount of such interest so paid or accrued1 over 7ii7 the amount described in subparagraph 7,b71 plus 7,b7 the amount of interest includible in gross income of such corporation for such taxable year4 7#b7 ,international financial reporting group 7,a7 ,for purposes of this subsection1 the term international financial reporting group means1 with respect to any reporting year1 any group of entities which-- 7i7 includes-- 7,i7 at least one foreign corporation engaged in a trade or business within the ,united ,states1 or 7,,ii7 at least one domestic corporation and one foreign corporation1 7ii7 prepares consolidated financial statements with respect to such year1 and 7iii7 reports in such statements average annual gross receipts 7determined in the aggregate with respect to all entities which are part of such group7 for the #c-reporting-year period ending with such reporting year in excess of #ajj1jjj1jjj4 7,b7 ,rules relating to determination of average gross receipts ,for purposes of subparagraph 7,a77iii71 rules similar to the rules of section #ddh7;c77#c7 shall apply4 7#c7 ,allowable percentage ,for purposes of this subsection-- 7,a7 ,in general ,the term allowable percentage means1 with respect to any domestic corporation for any taxable year1 the ratio 7expressed as a percentage and not greater than #ajj percent7 of-- 7i7 such corporation's allocable share of the international financial reporting group's reported net interest expense for the reporting year of such group which ends in or with such taxable year of such corporation1 over 7ii7 such corporation's reported net interest expense for such reporting year of such group4 7,b7 ,reported net interest expense ,the term reported net interest expense means-- 7i7 with respect to any international financial reporting group for any reporting year1 the excess of-- 7,i7 the aggregate amount of interest expense reported in such group's consolidated financial statements for such taxable year1 over 7,,ii7 the aggregate amount of interest income reported in such group's consolidated financial statements for such taxable year1 and 7ii7 with respect to any domestic corporation for any reporting year1 the excess of-- 7,i7 the amount of interest expense of such corporation reported in the books and records of the international financial reporting group which are used in preparing such group's consolidated financial statements for such taxable year1 over 7,,ii7 the amount of interest income of such corporation reported in such books and records4 7,c7 ,allocable share of reported net interest expense ,with respect to any domestic corporation which is a member of any international financial reporting group1 such corporation's allocable share of such group's reported net interest expense for any reporting year is the portion of such expense which bears the same ratio to such expense as-- 7i7 the ,,ebitda of such corporation for such reporting year1 bears to 7ii7 the ,,ebitda of such group for such reporting year4 7,d7 ,,ebitda 7i7 ,in general ,the term ,,ebitda means1 with respect to any reporting year1 earnings before interest1 taxes1 depreciation1 and amortization-- 7,i7 as determined in the international financial reporting group's consolidated financial statements for such year1 or 7,,ii7 for purposes of subparagraph 7,a77i71 as determined in the books and records of the international financial reporting group which are used in preparing such statements if not determined in such statements4 7ii7 ,treatment of disregarded entities ,the ,,ebitda of any domestic corporation shall not fail to include the ,,ebitda of any entity which is disregarded for purposes of this chapter4 7iii7 ,treatment of intra-group distributions ,the ,,ebitda of any domestic corporation shall be determined without regard to any distribution received by such corporation from any other member of the international financial reporting group4 7,e7 ,special rules for non-positive ,,ebitda 7i7 ,non-positive group ,,ebitda ,in the case of any international financial reporting group the ,,ebitda of which is zero or less1 paragraph 7#a7 shall not apply to any member of such group the ,,ebitda of which is above zero4 7ii7 ,non-positive entity ,,ebitda ,in the case of any group member the ,,ebitda of which is zero or less1 paragraph 7#a7 shall be applied without regard to subparagraph 7,a7 thereof4 7#d7 ,consolidated financial statement ,for purposes of this subsection1 the term consolidated financial statement means any consolidated financial statement described in paragraph 7#b77;,a77ii7 if such statement is-- 7,a7 a financial statement which is certified as being prepared in accordance with generally accepted accounting principles1 international financial reporting standards1 or any other comparable method of accounting identified by the ,secretary1 and which is-- 7i7 a #aj-,k 7or successor form71 or annual statement to shareholders1 required to be filed with the ,united ,states ,securities and ,exchange ,commission1 7ii7 an audited financial statement which is used for-- 7,i7 credit purposes1 7,,ii7 reporting to shareholders1 partners1 or other proprietors1 or to beneficiaries1 or 7,,iii7 any other substantial nontax purpose1 but only if there is no statement described in clause 7i71 or 7iii7 filed with any other ,federal or ,state agency for nontax purposes1 but only if there is no statement described in clause 7i7 or 7ii71 or 7,b7 a financial statement which-- 7i7 is used for a purpose described in subclause 7,i71 7,,ii71 or 7,,iii7 of subparagraph 7,a77ii71 or 7ii7 filed with any regulatory or governmental body 7whether domestic or foreign7 specified by the ,secretary1 but only if there is no statement described in subparagraph 7,a74 7#e7 ,reporting year ,for purposes of this subsection1 the term reporting year means1 with respect to any international financial reporting group1 the year with respect to which the consolidated financial statements are prepared4 7#f7 ,application to certain entities 7,a7 ,partnerships ,except as otherwise provided by the ,secretary in paragraph 7#g71 this subsection shall apply to any partnership which is a member of any international financial reporting group under rules similar to the rules of section #afc7;j77#c74 7,b7 ,foreign corporations engaged in trade or business within the ,united ,states ,except as otherwise provided by the ,secretary in paragraph 7#h71 any deduction for interest paid or accrued by a foreign corporation engaged in a trade or business within the ,united ,states shall be limited in a manner consistent with the principles of this subsection4 7,c7 ,consolidated groups ,for purposes of this subsection1 the members of any group that file 7or are required to file7 a consolidated return with respect to the tax imposed by chapter #a for a taxable year shall be treated as a single corporation4 7#g7 ,regulations ,the ,secretary may issue such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection4 4 7b7 ,carryforward of disallowed interest 7#a7 ,in general ,section #afc7o7 is amended to read as follows3 7o7 ,carryforward of certain disallowed interest ,the amount of any interest not allowed as a deduction for any taxable year by reason of subsection 7j77#a7 or 7n77#a7 7whichever imposes the lower limitation with respect to such taxable year7 shall be treated as interest 7and as business interest for purposes of subsection 7j77#a77 paid or accrued in the succeeding taxable year4 ,interest paid or accrued in any taxable year 7determined without regard to the preceding sentence7 shall not be carried past the #eth taxable year following such taxable year1 determined by treating interest as allowed as a deduction on a first-in1 first-out basis4 4 7#b7 ,treatment of carryforward of disallowed interest in certain corporate acquisitions ,for rules related to the carryforward of disallowed interest in certain corporate acquisitions1 see the amendments made by section #ccja7;c74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #dcjc4 ,excise tax on certain payments from domestic corporations to related foreign corporations2 election to treat such payments as effectively connected income 7a7 ,excise tax on certain amounts from domestic corporations to foreign affiliates 7#a7 ,in general ,chapter #cf is amended by adding at the end the following new subchapter3 ,e ,tax on certain amounts to foreign affiliates ,sec4 #ddia4 ,imposition of tax on certain amounts from domestic corporations to foreign affiliates4 #ddia4 ,imposition of tax on certain amounts from domestic corporations to foreign affiliates 7a7 ,in general ,there is hereby imposed on each specified amount paid or incurred by a domestic corporation to a foreign corporation which is a member of the same international financial reporting group as such domestic corporation a tax equal to the highest rate of tax in effect under section #aa multiplied by such amount4 7b7 ,by whom paid ,the tax imposed by subsection 7a7 shall be paid by the domestic corporation described in such subsection4 7c7 ,exception for effectively connected income ,subsection 7a7 shall not apply to so much of any specified amount as is effectively connected with the conduct of a trade or business within the ,united ,states if such amount is subject to tax under chapter #a4 ,in the case of any amount which is treated as effectively connected with the conduct of a trade or business within the ,united ,states by reason of section #hhb7;g71 the preceding sentence shall apply to such amount only if the domestic corporation provides to the ,secretary 7at such time and in such form and manner as the ,secretary may provide7 a copy of the election made under section #hhb7;g7 by the foreign corporation referred to in subsection 7a74 7d7 ,definitions and special rules ,terms used in this section that are also used in section #hhb7;g7 shall have the same meaning as when used in such section and rules similar to the rules of paragraphs 7#e7 and 7#f7 of such section shall apply for purposes of this section4 4 7#b7 ,denial of deduction for tax imposed ,section #bge7;a7 is amended by inserting after paragraph 7#f7 the following new paragraph3 7#g7 ,taxes imposed by section #ddia4 4 7#c7 ,clerical amendment ,the table of subchapters for chapter #cf is amended by adding at the end the following new item3 ,subchapter ,e4 ,tax on certain amounts to foreign affiliates4 4 7b7 ,election to treat certain payments from domestic corporations to related foreign corporations as effectively connected income ,section #hhb is amended by adding at the end the following new subsection3 7g7 ,election to treat certain payments from domestic corporations to related foreign corporations as effectively connected income 7#a7 ,in general ,in the case of any specified amount paid or incurred by a domestic corporation to a foreign corporation which is a member of the same international financial reporting group as such domestic corporation and which has elected to be subject to the provisions of this subsection-- 7,a7 such amount shall be taken into account 7other than for purposes of sections #bde1 #bde;,a1 and #hha7 in the taxable year of such foreign corporation during which such amount is paid or incurred as if-- 7i7 such foreign corporation were engaged in a trade or business within the ,united ,states1 7ii7 such foreign corporation had a permanent establishment in the ,united ,states during the taxable year1 and 7iii7 such payment were effectively connected with the conduct of a trade or business within the ,united ,states and were attributable to such permanent establishment1 7,b7 for purposes of subsection 7c77#a77;,a71 no deduction shall be allowed with respect to such amount and such subsection shall be applied without regard to such amount1 and 7,c7 the foreign corporation shall be allowed a deduction 7for the taxable year referred to in subparagraph 7,a77 equal to the deemed expenses with respect to such amount4 7#b7 ,specified amount ,for purposes of this subsection-- 7,a7 ,in general ,the term specified amount means any amount which is1 with respect to the payor1 allowable as a deduction or includible in costs of goods sold1 inventory1 or the basis of a depreciable or amortizable asset4 7,b7 ,exceptions ,the term specified amount shall not include-- 7i7 interest1 7ii7 any amount paid or incurred for the acquisition of any security described in section #dge7;c77#b7 7determined without regard to the last sentence thereof7 or any commodity described in section #dge7;e77#b71 7iii7 except as provided in subparagraph 7,c71 any amount with respect to which tax is imposed under section #hha7;a71 and 7iv7 in the case of a payor which has elected to use a services cost method for purposes of section #dhb1 any amount paid or incurred for services if such amount is the total services cost with no markup4 7,c7 ,amounts not treated as effectively connected to extent of gross-basis tax ,subparagraph 7,b77iii7 shall only apply to so much of any specified amount as bears the proportion to such amount as-- 7i7 the rate of tax imposed under section #hha7;a7 with respect to such amount1 bears to 7ii7 #cj percent4 7#c7 ,deemed expenses 7,a7 ,in general ,the deemed expenses with respect to any specified amount received by a foreign corporation during any reporting year is the amount of expenses such that the net income ratio of such foreign corporation with respect to such amount 7taking into account only such specified amount and such deemed expenses7 is equal to the net income ratio of the international financial reporting group determined for such reporting year with respect to the product line to which the specified amount relates4 7,b7 ,net income ratio ,for purposes of this paragraph1 the term net income ratio means the ratio of-- 7i7 net income determined without regard to interest income1 interest expense1 and income taxes1 divided by 7ii7 revenues4 7,c7 ,method of determination ,amounts described in subparagraph 7,b7 shall be determined with respect to the international financial reporting group on the basis of the consolidated financial statements referred to in paragraph 7#d77;,a77i7 and the books and records of the members of the international financial reporting group which are used in preparing such statements1 taking into account only revenues and expenses of the members of such group 7other than the members of such group which are 7or are treated as7 a domestic corporation for purposes of this subsection7 derived from1 or incurred with respect to-- 7i7 persons who are not members of such group1 and 7ii7 members of such group which are 7or are treated as7 a domestic corporation for purposes of this subsection4 7#d7 ,international financial reporting group ,for purposes of this subsection-- 7,a7 ,in general ,the term international financial reporting group means any group of entities1 with respect to any specified amount1 if such amount is paid or incurred during a reporting year of such group with respect to which-- 7i7 such group prepares consolidated financial statements 7within the meaning of section #afc7n77#d77 with respect to such year1 and 7ii7 the average annual aggregate payment amount of such group for the #c-reporting-year period ending with such reporting year exceeds #ajj1jjj1jjj4 7,b7 ,annual aggregate payment amount ,the term annual aggregate payment amount means1 with respect to any reporting year of the group referred to in subparagraph 7,a77i71 the aggregate specified amounts to which paragraph 7#a7 applies 7or would apply if such group were an international financial reporting group74 7,c7 ,application of certain rules ,rules similar to the rules of subparagraphs 7,a71 7,b71 and 7,d7 of section #ddh7;c77#c7 shall apply for purposes of this paragraph4 7#e7 ,treatment of partnerships ,any specified amount paid1 incurred1 or received by a partnership which is a member of any international financial reporting group 7and any amount treated as paid1 incurred1 or received by a partnership under this paragraph7 shall be treated for purposes of this subsection as amounts paid1 incurred1 or received1 respectively1 by each partner of such partnership in an amount equal to such partner's distributive share of the items of income1 gain1 deduction1 or loss to which such amounts relate4 7#f7 ,treatment of amounts in connection with ,united ,states trade or business ,any specified amount paid1 incurred1 or received by a foreign corporation in connection with the conduct of a trade or business within the ,united ,states 7other than a trade or business it is deemed to conduct pursuant to this subsection7 shall be treated for purposes of this subsection as an amount paid1 incurred1 or received1 respectively1 by a domestic corporation4 ,for purposes of the preceding sentence1 a foreign corporation shall be deemed to pay1 incur1 and receive amounts with respect to a trade or business it conducts within the ,united ,states 7other than a trade or business it is deemed to conduct pursuant to this subsection7 to the extent such foreign corporation would be treated as paying1 incurring1 or receiving such amounts from such trade or business if such trade or business were a domestic corporation4 7#g7 ,joint and several liability of members of internal financial reporting group ,in the case of any underpayment with respect to any taxable year of a foreign corporation which is a member of an international financial accounting group1 each domestic corporation which is a member of such group at any time during such taxable year shall be jointly and severally liable for-- 7,a7 so much of such underpayment as does not exceed the excess 7if any7 of such underpayment over the amount of such underpayment determined without regard to this subsection1 and 7,b7 any penalty1 addition to tax1 or additional amount attributable to the amount described in subparagraph 7,a74 7#h7 ,foreign tax credit allowed ,the credit allowed under section #ijf7;a7 with respect to amounts taken into account in income under paragraph 7#a77;,a7 shall be limited to #hj percent of the amount of taxes paid or accrued and determined without regard to section #ijf7;b77#a74 7#i7 ,election ,any election under paragraph 7#a7-- 7,a7 shall be made at such time and in such form and manner as the ,secretary may provide1 and 7,b7 shall apply for the taxable year for which made and all subsequent taxable years unless revoked with the consent of the ,secretary4 7#aj7 ,regulations ,the ,secretary may issue such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection1 including regulations or other guidance-- 7,a7 to provide for the proper determination of product lines1 and 7,b7 to prevent the avoidance of the purposes of this subsection through the use of conduit transactions or by other means4 4 7c7 ,reporting requirements 7#a7 ,reporting by foreign corporation ,section #fjch;,c7b7 is amended to read as follows3 7b7 ,required information 7#a7 ,in general ,the information described in this subsection is-- 7,a7 the information described in section #fjch;,a7b71 and 7,b7 such other information as the ,secretary may prescribe by regulations relating to any item not directly connected with a transaction for which information is required under subparagraph 7,a74 7#b7 ,certain payments from related domestic corporations 7,a7 ,in general ,in the case of any reporting corporation that receives during the taxable year any amount to which section #hhb7;g77#a7 applies1 the information described in this subsection shall include1 with respect to each member of the international financial reporting group from which any such amount is received-- 7i7 the name and taxpayer identification number of such member1 7ii7 the aggregate amounts received from such member1 7iii7 the product lines to which such amounts relate1 the aggregate amounts relating to each such product line1 and the net income ratio for each such product line 7determined under section #hhb7;g77#c77;,b7 with respect to the international financial reporting group71 and 7iv7 a summary of any changes in financial accounting methods that affect the computation of any net income ratio described in clause 7iii74 7,b7 ,definitions and special rules ,terms used in this paragraph that are also used in section #hhb7;g7 shall have the same meaning as when used in such section and rules similar to the rules of paragraphs 7#e7 and 7#f7 of such section shall apply for purposes of this paragraph4 4 7#b7 ,reporting by domestic group members 7,a7 ,in general ,subpart ,a of part ,,iii of subchapter ,a of chapter #fa is amended by inserting after section #fjch;,d the following new section3 #fjch;,e4 ,information with respect to certain payments from domestic corporations to related foreign corporations 7a7 ,in general ,in the case of any domestic corporation which pays or incurs any amount to which section #hhb7;g77#a7 applies1 such person shall-- 7#a7 make a return according to the forms and regulations prescribed the ,secretary1 setting forth the information described in subsection 7b71 and 7#b7 maintain 7at the location1 in the manner1 and to the extent prescribed in regulations7 such records as may be appropriate to determine liability for tax pursuant to paragraphs 7#a7 and 7#g7 of section #hhb7;g74 7b7 ,required information ,the information described in this subsection is-- 7#a7 the name and taxpayer identification number of the common parent of the international financial reporting group in which such domestic corporation is a member1 and 7#b7 with respect to any person who receives an amount described in subsection 7a7 from such domestic corporation-- 7,a7 the name and taxpayer identification number of such person1 7,b7 the aggregate amounts received by such person1 7,c7 the product lines to which such amounts relate1 the aggregate amounts relating to each such product line1 and the net income ratio for each such product line 7determined under section #hhb7;g77#c77;,b7 with respect to the international financial reporting group71 and 7,d7 a summary of any changes in financial accounting methods that affect the computation of any net income ratios described in subparagraph 7,c74 7c7 ,definitions and special rules ,terms used in this paragraph that are also used in section #hhb7;g7 shall have the same meaning as when used in such section and rules similar to the rules of paragraphs 7#e7 and 7#f7 of such section shall apply for purposes of this paragraph4 4 7,b7 ,clerical amendment ,the table of sections for subpart ,a of part ,,iii of subchapter ,a of chapter #fa is amended by inserting after the item relating to section #fjch;,d the following new item3 ,sec4 #fjch;,e4 ,information with respect to certain payments from domestic corporations to related foreign corporations4 4 7d7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjah4 ,e ,provisions related to possessions of the ,united ,states #ddja4 ,extension of deduction allowable with respect to income attributable to domestic production activities in ,puerto ,rico 7a7 ,in general ,section #aii7;d77#h77;,c71 prior to its repeal by this ,act1 is amended-- 7#a7 by striking first #aa taxable years and inserting first #ab taxable years1 and 7#b7 by striking ,january #a1 #bjag and inserting ,january #a1 #bjah4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjaf4 #ddjb4 ,extension of temporary increase in limit on cover over of rum excise taxes to ,puerto ,rico and the ,virgin ,islands 7a7 ,in general ,section #gfeb7;f77#a7 is amended by striking ,january #a1 #bjag and inserting ,january #a1 #bjbc4 7b7 ,effective date ,the amendment made by this section shall apply to distilled spirits brought into the ,united ,states after ,december #ca1 #bjaf4 #ddjc4 ,extension of ,american ,samoa economic development credit 7a7 ,in general ,section #aai7;d7 of division ,a of the ,tax ,relief and ,health ,care ,act of #bjjf is amended-- 7#a7 by striking ,january #a1 #bjag each place it appears and inserting ,january #a1 #bjbc1 7#b7 by striking first #aa taxable years in paragraph 7#a7 and inserting first #ag taxable years1 and 7#c7 by striking first #e taxable years in paragraph 7#b7 and inserting first #aa taxable years4 7b7 ,treatment of certain references ,section #aai7;e7 of division ,a of the ,tax ,relief and ,health ,care ,act of #bjjf is amended by adding at the end the following3 ,references in this subsection to section #aii of the ,internal ,revenue ,code of #aihf shall be treated as references to such section as in effect before its repeal by the ,tax ,cuts and ,jobs ,act44 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjaf4 ,f ,other international reforms #deja4 ,restriction on insurance business exception to passive foreign investment company rules 7a7 ,in general ,section #abig7;b77#b77;,b7 is amended to read as follows3 7,b7 derived in the active conduct of an insurance business by a qualifying insurance corporation 7as defined in subsection 7f771 4 7b7 ,qualifying insurance corporation defined ,section #abig is amended by adding at the end the following new subsection3 7f7 ,qualifying insurance corporation ,for purposes of subsection 7b77#b77;,b7-- 7#a7 ,in general ,the term qualifying insurance corporation means1 with respect to any taxable year1 a foreign corporation-- 7,a7 which would be subject to tax under subchapter ,l if such corporation were a domestic corporation1 and 7,b7 the applicable insurance liabilities of which constitute more than #be percent of its total assets1 determined on the basis of such liabilities and assets as reported on the corporation's applicable financial statement for the last year ending with or within the taxable year4 7#b7 ,alternative facts and circumstances test for certain corporations ,if a corporation fails to qualify as a qualified insurance corporation under paragraph 7#a7 solely because the percentage determined under paragraph 7#a77;,b7 is #be percent or less1 a ,united ,states person that owns stock in such corporation may elect to treat such stock as stock of a qualifying insurance corporation if-- 7,a7 the percentage so determined for the corporation is at least #aj percent1 and 7,b7 under regulations provided by the ,secretary1 based on the applicable facts and circumstances-- 7i7 the corporation is predominantly engaged in an insurance business1 and 7ii7 such failure is due solely to runoff-related or rating-related circumstances involving such insurance business4 7#c7 ,applicable insurance liabilities ,for purposes of this subsection-- 7,a7 ,in general ,the term applicable insurance liabilities means1 with respect to any life or property and casualty insurance business-- 7i7 loss and loss adjustment expenses1 and 7ii7 reserves 7other than deficiency1 contingency1 or unearned premium reserves7 for life and health insurance risks and life and health insurance claims with respect to contracts providing coverage for mortality or morbidity risks4 7,b7 ,limitations on amount of liabilities ,any amount determined under clause 7i7 or 7ii7 of subparagraph 7,a7 shall not exceed the lesser of such amount-- 7i7 as reported to the applicable insurance regulatory body in the applicable financial statement described in paragraph 7#d77;,a7 7or1 if less1 the amount required by applicable law or regulation71 or 7ii7 as determined under regulations prescribed by the ,secretary4 7#d7 ,other definitions and rules ,for purposes of this subsection-- 7,a7 ,applicable financial statement ,the term applicable financial statement means a statement for financial reporting purposes which-- 7i7 is made on the basis of generally accepted accounting principles1 7ii7 is made on the basis of international financial reporting standards1 but only if there is no statement that meets the requirement of clause 7i71 or 7iii7 except as otherwise provided by the ,secretary in regulations1 is the annual statement which is required to be filed with the applicable insurance regulatory body1 but only if there is no statement which meets the requirements of clause 7i7 or 7ii74 7,b7 ,applicable insurance regulatory body ,the term applicable insurance regulatory body means1 with respect to any insurance business1 the entity established by law to license1 authorize1 or regulate such business and to which the statement described in subparagraph 7,a7 is provided4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,v ,exempt organizations ,a ,unrelated ,business ,income ,tax #ejja4 ,clarification of unrelated business income tax treatment of entities treated as exempt from taxation under section #eja7;a7 7a7 ,in general ,section #eaa is amended by adding at the end the following new subsection3 7d7 ,organizations and trusts exempt from taxation not solely by reason of section #eja7;a7 ,for purposes of subsections 7a77#b7 and 7b77#b71 an organization or trust shall not fail to be treated as exempt from taxation under this subtitle by reason of section #eja7;a7 solely because such organization is also so exempt1 or excludes amounts from gross income1 by reason of any other provision of this title4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #ejjb4 ,exclusion of research income limited to publicly available research 7a7 ,in general ,section #eab7;b77#i7 is amended by striking from research and inserting from such research4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,b ,excise ,taxes #eaja4 ,simplification of excise tax on private foundation investment income 7a7 ,rate reduction ,section #didj7;a7 is amended by striking #b percent and inserting #a4d percent4 7b7 ,repeal of special rules for certain private foundations ,section #didj is amended by striking subsection 7e74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #eajb4 ,private operating foundation requirements relating to operation of art museum 7a7 ,in general ,section #didb7;j7 is amended by adding at the end the following new paragraph3 7#f7 ,organization operating art museum ,for purposes of this section1 the term operating foundation shall not include an organization which operates an art museum as a substantial activity unless such museum is open during normal business hours to the public for at least #a1jjj hours during the taxable year4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #eajc4 ,excise tax based on investment income of private colleges and universities 7a7 ,in general ,chapter #db is amended by adding at the end the following new subchapter3 ,h ,excise tax based on investment income of private colleges and universities ,sec4 #difi4 ,excise tax based on investment income of private colleges and universities4 #difi4 ,excise tax based on investment income of private colleges and universities 7a7 ,tax imposed ,there is hereby imposed on each applicable educational institution for the taxable year a tax equal to #a4d percent of the net investment income of such institution for the taxable year4 7b7 ,applicable educational institution ,for purposes of this subchapter-- 7#a7 ,in general ,the term applicable educational institution means an eligible educational institution 7as defined in section #be;,a7e77#c77-- 7,a7 which has at least #ejj students during the preceding taxable year1 7,b7 which is not described in the first sentence of section #eaa7;a77#b77;,b71 and 7,c7 the aggregate fair market value of the assets of which at the end of the preceding taxable year 7other than those assets which are used directly in carrying out the institution's exempt purpose7 is at least #bej1jjj per student of the institution4 7#b7 ,students ,for purposes of paragraph 7#a71 the number of students of an institution shall be based on the daily average number of full-time students attending such institution 7with part-time students taken into account on a full-time student equivalent basis74 7c7 ,net investment income ,for purposes of this section1 net investment income shall be determined under rules similar to the rules of section #didj7;c74 7d7 ,assets and net investment income of related organizations 7#a7 ,in general ,for purposes of subsections 7b77#a77;,c7 and 7c71 the assets and net investment income of any related organization shall be treated as the assets and net investment income of the eligible educational institution4 7#b7 ,related organization ,for purposes of this subsection1 the term related organization means1 with respect to an eligible educational institution1 any organization which-- 7,a7 controls1 or is controlled by1 such institution1 7,b7 is controlled by one or more persons that control such institution1 or 7,c7 is a supported organization 7as defined in section #eji7;f77#c771 or an organization described in section #eji7;a77#c71 during the taxable year with respect to such institution4 4 7b7 ,clerical amendment ,the table of subchapters for chapter #db is amended by adding at the end the following new item3 ,subchapter ,h--,excise tax based on investment income of private colleges and universities 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #eajd4 ,exception from private foundation excess business holding tax for independently-operated philanthropic business holdings 7a7 ,in general ,section #didc is amended by adding at the end the following new subsection3 7g7 ,exception for certain holdings limited to independently-operated philanthropic business 7#a7 ,in general ,subsection 7a7 shall not apply with respect to the holdings of a private foundation in any business enterprise which for the taxable year meets-- 7,a7 the ownership requirements of paragraph 7#b71 7,b7 the all profits to charity distribution requirement of paragraph 7#c71 and 7,c7 the independent operation requirements of paragraph 7#d74 7#b7 ,ownership ,the ownership requirements of this paragraph are met if-- 7,a7 #ajj percent of the voting stock in the business enterprise is held by the private foundation at all times during the taxable year1 and 7,b7 all the private foundation's ownership interests in the business enterprise were acquired not by purchase4 7#c7 ,all profits to charity 7,a7 ,in general ,the all profits to charity distribution requirement of this paragraph is met if the business enterprise1 not later than #abj days after the close of the taxable year1 distributes an amount equal to its net operating income for such taxable year to the private foundation4 7,b7 ,net operating income ,for purposes of this paragraph1 the net operating income of any business enterprise for any taxable year is an amount equal to the gross income of the business enterprise for the taxable year1 reduced by the sum of-- 7i7 the deductions allowed by chapter #a for the taxable year which are directly connected with the production of such income1 7ii7 the tax imposed by chapter #a on the business enterprise for the taxable year1 and 7iii7 an amount for a reasonable reserve for working capital and other business needs of the business enterprise4 7#d7 ,independent operation ,the independent operation requirements of this paragraph are met if1 at all times during the taxable year-- 7,a7 no substantial contributor 7as defined in section #dieh7;c77#c77;,c77 to the private foundation1 or family member of such a contributor 7determined under section #dieh7;f77#d77 is a director1 officer1 trustee1 manager1 employee1 or contractor of the business enterprise 7or an individual having powers or responsibilities similar to any of the foregoing71 7,b7 at least a majority of the board of directors of the private foundation are not-- 7i7 also directors or officers of the business enterprise1 or 7ii7 members of the family 7determined under section #dieh7;f77#d77 of a substantial contributor 7as defined in section #dieh7;c77#c77;,c77 to the private foundation1 and 7,c7 there is no loan outstanding from the business enterprise to a substantial contributor 7as so defined7 to the private foundation or a family member of such contributor 7as so determined74 7#e7 ,certain deemed private foundations excluded ,this subsection shall not apply to-- 7,a7 any fund or organization treated as a private foundation for purposes of this section by reason of subsection 7e7 or 7f71 7,b7 any trust described in section #didg7;a77#a7 7relating to charitable trusts71 and 7,c7 any trust described in section #didg7;a77#b7 7relating to split-interest trusts74 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,c ,requirements for organizations exempt from tax #ebja4 #eja7;c77#c7 organizations permitted to make statements relating to political campaign in ordinary course of activities 7a7 ,in general ,section #eja is amended by adding at the end the following new subsection3 7s7 ,special rule relating to political campaign statements of organizations described in subsection 7c77#c7 7#a7 ,in general ,for purposes of subsection 7c77#c7 and sections #agj7;c77#b71 #bjee1 #bajf1 #bebb1 and #diee1 an organization shall not fail to be treated as organized and operated exclusively for a purpose described in subsection 7c77#c71 nor shall it be deemed to have participated in1 or intervened in any political campaign on behalf of 7or in opposition to7 any candidate for public office1 solely because of the content of any statement which-- 7,a7 is made in the ordinary course of the organization's regular and customary activities in carrying out its exempt purpose1 and 7,b7 results in the organization incurring not more than de minimis incremental expenses4 7#b7 ,termination ,paragraph 7#a7 shall not apply to taxable years beginning after ,december #ca1 #bjbc4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjah4 #ebjb4 ,additional reporting requirements for donor advised fund sponsoring organizations 7a7 ,in general ,section #fjcc7k7 is amended by striking and at the end of paragraph 7#b71 by striking the period at the end of paragraph 7#c71 and by adding at the end the following new paragraphs3 7#d7 indicate the average amount of grants made from such funds during such taxable year 7expressed as a percentage of the value of assets held in such funds at the beginning of such taxable year71 and 7#e7 indicate whether the organization has a policy with respect to donor advised funds 7as so defined7 for frequency and minimum level of distributions4 ,such organization shall include with such return a copy of any policy described in paragraph 7#e74 4 7b7 ,effective date ,the amendment made by this section shall apply for returns filed for taxable years beginning after ,december #ca1 #bjag4 ,passed the ,house of ,representatives ,november #af1 #bjag4,karen ,l4 ,haas1,clerk ,november #bh1 #bjag,read the second time and placed on the calendar