,,ii ,calendar ,no4 #bfi #aaeth ,,congress #ast ,session ,s4 #a ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,november #bh1 #bjag ,mr4 ,enzi1 from the ,committee on the ,budget1 reported the following original bill2 which was read twice and placed on the calendar ,a ,,bill ,to provide for reconciliation pursuant to title ,,ii of the concurrent resolution on the budget for fiscal year #bjah4 ,i #aajjj4 ,short title1 etc 7a7 ,short title ,this title may be cited as the ,tax ,cuts and ,jobs ,act4 7b7 ,amendment of #aihf code ,except as otherwise expressly provided1 whenever in this title 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 ,a ,individual tax reform ,i ,tax rate reform #aajja4 ,modification of rates 7a7 ,in general ,section #a is amended by adding at the end the following new subsection3 7j7 ,modifications for taxable years #bjah through #bjbe 7#a7 ,in general ,in the case of a taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf-- 7,a7 subsection 7i7 shall not apply1 and 7,b7 this section 7other than subsection 7i77 shall be applied as provided in paragraphs 7#b7 through 7#g74 7#b7 ,rate tables 7,a7 ,married individuals filing joint returns and surviving spouses ,the following table shall be applied in lieu of the table contained in subsection 7a73 ,if taxable income is3,the tax is3,not over #ai1jejaj of taxable income4,over #ai1jej but not over #gg1djja1ije1 plus #ab of the excess over #ai1jej4,over #gg1djj but not over #adj1jjjh1ijg1 plus #bb of the excess over #gg1djj4,over #adj1jjj but not over #cbj1jjjbb1fgi1 plus #bd of the excess over #adj1jjj4,over #cbj1jjj but not over #djj1jjjfe1hgi1 plus #cb of the excess over #cbj1jjj4,over #djj1jjj but not over #a1jjj1jjjia1dgi1 plus #ce of the excess over #djj1jjj4,over #a1jjj1jjjcja1dgi plus #ch4e of the excess over #a1jjj1jjj4 7,b7 ,heads of households ,the following table shall be applied in lieu of the table contained in subsection 7b73 ,if taxable income is3,the tax is3,not over #ac1fjjaj of taxable income4,over #ac1fjj but not over #ea1hjja1cfj1 plus #ab of the excess over #ac1fjj4,over #ea1hjj but not over #gj1jjje1idd1 plus #bb of the excess over #ea1hjj4,over #gj1jjj but not over #afj1jjji1idh1 plus #bd of the excess over #gj1jjj4,over #afj1jjj but not over #bjj1jjjca1edh1 plus #cb of the excess over #afj1jjj4,over #bjj1jjj but not over #ejj1jjjdd1cdh1 plus #ce of the excess over #bjj1jjj4,over #ejj1jjjadi1cdh1 plus #ch4e of the excess over #ejj1jjj4 7,c7 ,unmarried individuals other than surviving spouses and heads of households ,the following table shall be applied in lieu of the table contained in subsection 7c73 ,if taxable income is3,the tax is3,not over #i1ebeaj of taxable income4,over #i1ebe but not over #ch1gjjieb4ej1 plus #ab of the excess over #i1ebe4,over #ch1gjj but not over #gj1jjjd1dec4ej1 plus #bb of the excess over #ch1gjj4,over #gj1jjj but not over #afj1jjjaa1cci4ej1 plus #bd of the excess over #gj1jjj4,over #afj1jjj but not over #bjj1jjjcb1ici4ej1 plus #cb of the excess over #afj1jjj4,over #bjj1jjj but not over #ejj1jjjde1gci4ej1 plus #ce of the excess over #bjj1jjj4,over #ejj1jjjaej1gci4ej1 plus #ch4e of the excess over #ejj1jjj4 7,d7 ,married individuals filing separate returns ,the following table shall be applied in lieu of the table contained in subsection 7d73 ,if taxable income is3,the tax is3,not over #i1ebeaj of taxable income4,over #i1ebe but not over #ch1gjjieb4ej1 plus #ab of the excess over #i1ebe4,over #ch1gjj but not over #gj1jjjd1dec4ej1 plus #bb of the excess over #ch1gjj4,over #gj1jjj but not over #afj1jjjaa1cci4ej1 plus #bd of the excess over #gj1jjj4,over #afj1jjj but not over #bjj1jjjcb1ici4ej1 plus #cb of the excess over #afj1jjj4,over #bjj1jjj but not over #ejj1jjjde1gci4ej1 plus #ce of the excess over #bjj1jjj4,over #ejj1jjjaej1gci4ej1 plus #ch4e of the excess over #ejj1jjj4 7,e7 ,estates and trusts ,the following table shall be applied in lieu of the table contained in subsection 7e73 ,if taxable income is3,the tax is3,not over #b1eejaj of taxable income4,over #b1eej but not over #i1aejbee1 plus #bd of the excess over #b1eej4,over #i1aej but not over #ab1ejja1hci1 plus #ce of the excess over #i1aej4,over #ab1ejjc1jaa4ej1 plus #ch4e of the excess over #ab1ejj4 7,f7 ,references to rate tables ,any reference in this title to a rate of tax under subsection 7c7 shall be treated as a reference to the corresponding rate bracket under subparagraph 7,c7 of this paragraph1 except that the reference in section #cdjb7q77#a7 to the third lowest rate of tax applicable under subsection 7c7 shall be treated as a reference to the fourth lowest rate of tax under subparagraph 7,c74 7#c7 ,adjustments1 elimination of marriage penalty2 etc 7,a7 ,no adjustment in #bjah ,the tables contained in paragraph 7#b7 shall apply without adjustment for taxable years beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjai4 7,b7 ,subsequent years ,for taxable years beginning after ,december #ca1 #bjah1 the ,secretary shall prescribe tables which shall apply in lieu of the tables contained in paragraph 7#b7 in the same manner as under paragraphs 7#a7 and 7#b7 of subsection 7f71 except that in prescribing such tables-- 7i7 subsection 7f77#c7 shall be applied by substituting calendar year #bjag for calendar year #bjaf in subparagraph 7,a77ii7 thereof1 and 7ii7 subsection 7f77#g7 shall not apply and-- 7,i7 the maximum taxable income in each of the rate brackets in the table contained in paragraph 7#b77;,a7 7and the minimum taxable income in the next higher taxable income bracket with respect to each such bracket in such table7 shall be #bjj percent of the maximum taxable income in the corresponding rate bracket in the table contained in paragraph 7#b77;,c7 7after any other adjustment under paragraph 7#c771 and 7,,ii7 the comparable taxable income amounts in the table contained in paragraph 7#b77;,d7 shall be of the amounts determined under subparagraph 7,a74 7#d7 ,special rules for certain children with unearned income 7,a7 ,in general ,in the case of a child to whom subsection 7g7 applies for the taxable year1 the rules of subparagraphs 7,b7 and 7,c7 shall apply in lieu of the rule under subsection 7g77#a74 7,b7 ,modifications to applicable rate brackets ,in determining the amount of tax imposed by this section for the taxable year on a child described in subparagraph 7,a71 the income tax table otherwise applicable under this subsection to the child shall be applied with the following modifications3 7i7 #bd-percent bracket ,the maximum taxable income which is taxed at a rate below #bd percent shall not be more than the earned taxable income of such child4 7ii7 #ce-percent bracket ,the maximum taxable income which is taxed at a rate below #ce percent shall not be more than the sum of-- 7,i7 the earned taxable income of such child1 plus 7,,ii7 the minimum taxable income for the #ce-percent bracket in the table under paragraph 7#b77;,e7 7as adjusted under paragraph 7#c77 for the taxable year4 7iii7 #ch4e-percent bracket ,the maximum taxable income which is taxed at a rate below #ch4e percent shall not be more than the sum of-- 7,i7 the earned taxable income of such child1 plus 7,,ii7 the minimum taxable income for the #ch4e-percent bracket in the table under paragraph 7#b77;,e7 7as adjusted under paragraph 7#c77 for the taxable year4 7,c7 ,coordination with capital gains rates ,for purposes of applying section #a7;h7 7after the modifications under paragraph 7#e77-- 7i7 the maximum zero rate amount shall not be more than the sum of-- 7,i7 the earned taxable income of such child1 plus 7,,ii7 the amount in effect under paragraph 7#e77;,b77i77,,iv7 for the taxable year1 and 7ii7 the maximum #ae-percent rate amount shall not be more than the sum of-- 7,i7 the earned taxable income of such child1 plus 7,,ii7 the amount in effect under paragraph 7#e77;,b77ii77,,iv7 for the taxable year4 7,d7 ,earned taxable income ,for purposes of this paragraph1 the term earned taxable income means1 with respect to any child for any taxable year1 the taxable income of such child reduced 7but not below zero7 by the net unearned income 7as defined in subsection 7g77#d77 of such child4 7#e7 ,application of current income tax brackets to capital gains brackets 7,a7 ,in general ,section #a7;h77#a7 shall be applied-- 7i7 by substituting below the maximum zero rate amount for which would 7without regard to this paragraph7 be taxed at a rate below #be percent in subparagraph 7,b77i71 and 7ii7 by substituting below the maximum #ae-percent rate amount for which would 7without regard to this paragraph7 be taxed at a rate below #ci4f percent in subparagraph 7,c77ii77,i74 7,b7 ,maximum amounts defined ,for purposes of applying section #a7;h7 with the modifications described in subparagraph 7,a7-- 7i7 ,maximum zero rate amount ,the maximum zero rate amount shall be-- 7,i7 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 7,,ii7 in the case of an individual who is a head of household 7as defined in section #b7;b771 #ea1gjj1 7,,iii7 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 7,,iv7 in the case of an estate or trust1 #b1fjj4 7ii7 ,maximum #ae-percent rate amount ,the maximum #ae-percent rate amount shall be-- 7,i7 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 7,,ii7 in the case of an individual who is the head of a household 7as defined in section #b7;b771 #deb1djj1 7,,iii7 in the case of any other individual 7other than an estate or trust71 #dbe1hjj1 and 7,,iv7 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 clauses 7i7 and 7ii7 of subparagraph 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 7f77#c7 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#f7 ,section #ae not to apply ,section #ae shall not apply to any change in a rate of tax by reason of this subsection4 4 7b7 ,due diligence tax preparer requirement with respect to head of household filing status ,subsection 7g7 of section #ffie is amended to read as follows3 7g7 ,failure to be diligent in determining eligibility for certain tax benefits ,any person who is a tax return preparer with respect to any return or claim for refund who fails to comply with due diligence requirements imposed by the ,secretary by regulations with respect to determining-- 7#a7 eligibility to file as a head of household 7as defined in section #b7;b77 on the return1 or 7#b7 eligibility for1 or the amount of1 the credit allowable by section #bd1 #be;,a7a77#a71 or #cb1 shall pay a penalty of #ejj for each such failure4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajjb4 ,inflation adjustments based on chained ,,cpi 7a7 ,in general ,subsection 7f7 of section #a is amended by striking paragraph 7#c7 and by inserting after paragraph 7#b7 the following new paragraph3 7#c7 ,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 ,,cpi for calendar year #bjaf1 multiplied by the amount determined under subparagraph 7,b74 7,b7 ,amount determined ,the amount determined under this clause is the amount obtained by dividing-- 7i7 the ,c-,,cpi-,u for calendar year #bjaf1 by 7ii7 the ,,cpi for calendar year #bjaf4 7,c7 ,special rule for adjustments with a base year after #bjaf ,for purposes of any provision of this title which provides for the substitution of a year after #bjaf for #bjaf in subparagraph 7,a77ii71 subparagraph 7,a7 shall be applied by substituting the ,c-,,cpi-,u for calendar year #bjaf for the ,,cpi for calendar year #bjaf and all that follows in clause 7ii7 thereof4 4 7b7 ,c-,,cpi-,u ,subsection 7f7 of section #a is amended by striking paragraph 7#g71 by redesignating paragraph 7#f7 as paragraph 7#g71 and by inserting after paragraph 7#e7 the following new paragraph3 7#f7 ,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 4 7c7 ,application to permanent tax tables ,section #a7;f77#b77;,a7 is amended by inserting 1 determined by substituting #aiib for #bjaf in paragraph 7#c77;,a77ii74 7d7 ,application to other ,internal ,revenue ,code of #aihf provisions 7#a7 ,the following sections are each amended by striking for calendar year #aiib in subparagraph 7,b7 and inserting for calendar year #bjaf in subparagraph 7,a77ii73 7,a7 ,section #bc7;h77#b74 7,b7 ,paragraphs 7#a77;,a77ii7 and 7#b77;,a77ii7 of section #be;,a7h74 7,c7 ,section #be;,b7b77#c77;,b74 7,d7 ,subsection 7b77#b77;,b77ii77,,ii71 and clauses 7i7 and 7ii7 of subsection 7j77#a77;,b71 of section #cb4 7,e7 ,section #cf;,b7f77#b77;,b77ii77,,ii74 7,f7 ,section #da7;e77#e77;,c77i74 7,g7 ,subsections 7e77#c77;,d77ii7 and 7h77#c77;,h77i77,,ii7 of section #db4 7,h7 ,section #de,r7d77#c77;,b77ii74 7,i7 ,section #fb7;d77#c77;,b74 7,j7 ,section #abe7;i77#b77;,b74 7,k7 ,section #ace7;b77#b77;,b77ii74 7,l7 ,section #acg7;f77#b74 7,m7 ,section #adf7;d77#b77;,b74 7,n7 ,section #adg7;c77#b77;,h77ii74 7,o7 ,section #agi7;b77#f77;,a77ii74 7,p7 ,subsections 7b77#e77;,c77i77,,ii7 and 7g77#h77;,b7 of section #bai4 7,q7 ,section #bbj7;g77#b74 7,r7 ,section #bba7;f77#a77;,b74 7,s7 ,section #bbc7;g77#a77;,b74 7,t7 ,section #djh;,a7c77#c77;,d77ii74 7,u7 ,section #dcj7;c77#g77;,d77vii77,,ii74 7,v7 ,section #eab7;d77#b77;,b74 7,w7 ,section #eac7;h77#b77;,c77ii74 7,x7 ,section #hca7;b77#b77;,d77ii74 7,y7 ,section #hgg;,a7a77#c77;,b77i77,,ii74 7,z7 ,section #bjaj7;c77#c77;,b77ii74 7,,aa7 ,section #bjcb;,a7a77#c77;,b74 7,,bb7 ,section #bejc7;b77#b77;,b74 7,,cc7 ,section #dbfa7;e77#d77;,a77ii74 7,,dd7 ,section #ejjj;,a7c77#c77;,d77ii74 7,,ee7 ,section #fcbc7;i77#d77;,b74 7,,ff7 ,section #fccd7;g77#a77;,b74 7,,gg7 ,section #ffja7;j77#c77;,b74 7,,hh7 ,section #ffea7;i77#a74 7,,ii7 ,section #ffeb7;c77#g77;,a74 7,,jj7 ,section #ffie7;h77#a74 7,,kk7 ,section #ffih7;e77#a74 7,,ll7 ,section #ffii7;e77#a74 7,,mm7 ,section #fgba7;f77#a74 7,,nn7 ,section #fgbb7;f77#a74 7,,oo7 ,section #gcde7;f77#b74 7,,pp7 ,section #gdcj7;c77#a74 7,,qq7 ,section #ihca7;d77#b77;,d77ii77,,ii74 7#b7 ,section #da7;e77#e77;,c77ii7 is amended-- 7,a7 by striking #a7;f77#c77;,b7 and inserting #a7;f77#c77;,a77ii71 and 7,b7 by striking #aiib and inserting #bjaf4 7#c7 ,section #db7;h77#f77;,g7 is amended-- 7,a7 by striking for calendar year #aihg in clause 7i77,,ii7 and inserting for calendar year #bjaf in subparagraph 7,a77ii7 thereof1 and 7,b7 by striking if the ,,cpi for any calendar year and all that follows in clause 7ii7 and inserting if the ,c-,,cpi-,u for any calendar year 7as defined in section #a7;f77#f77 exceeds the ,c-,,cpi-,u for the preceding calendar year by more than #e percent1 the ,c-,,cpi-,u for the base calendar year shall be increased such that such excess shall never be taken into account under clause 7i74 ,in the case of a base calendar year before #bjag1 the ,c-,,cpi-,u for such year shall be determined by multiplying the ,,cpi for such year by the amount determined under section #a7;f77#c77;,b744 7#d7 ,section #acb7;f77#f77;,a77ii7 is amended by striking for calendar year #aiib and inserting for calendar year #bjaf in subparagraph 7,a77ii7 thereof4 7#e7 ,section #afb7o77#c7 is amended by striking adjusted for changes in the ,consumer ,price ,index 7as defined in section #a7;f77#e77 since #aiia and inserting 8adjusted by increasing any such amount under the #aiia agreement by an amount equal to-- 7,a7 such amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 by substituting calendar year #aiij for calendar year #bjaf in subparagraph 7,a77ii7 thereof 4 7#f7 ,so much of clause 7ii7 of section #bac7;d77#aj77;,b7 as precedes the last sentence is amended to read as follows3 7ii7 ,medical care cost adjustment ,for purposes of clause 7i71 the medical care cost adjustment for any calendar year is the percentage 7if any7 by which-- 7,i7 the medical care component of the ,c-,,cpi-,u 7as defined in section #a7;f77#f77 for ,august of the preceding calendar year1 exceeds 7,,ii7 such component of the ,,cpi 7as defined in section #a7;f77#d77 for ,august of #aiif1 multiplied by the amount determined under section #a7;f77#c77;,b74 4 7#g7 ,section #hgg7;a77#b7 is amended by striking for #aiib in subparagraph 7,b7 and inserting for #bjaf in subparagraph 7,a77ii74 7#h7 ,section #iaa7;b77#b77;,d77ii77,,ii7 is amended by striking for #aiib in subparagraph 7,b7 and inserting for #bjaf in subparagraph 7,a77ii74 7#i7 ,paragraph 7#b7 of section #abgd;,a7d7 is amended to read as follows3 7#b7 ,adjustment for inflation ,in the case of any debt instrument arising out of a sale or exchange during any calendar year after #aihi1 each dollar amount contained in the preceding provisions of this section shall be increased by an amount equal to-- 7,a7 such amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 by substituting calendar year #aihh for calendar year #bjaf in subparagraph 7,a77ii7 thereof4 ,any increase under the preceding sentence shall be rounded to the nearest multiple of #ajj 7or1 if such increase is a multiple of #ej1 such increase shall be increased to the nearest multiple of #ajj74 4 7#aj7 ,section #dafa7;b77#b77;,c77i77,,ii7 is amended by striking for #aiib in subparagraph 7,b7 and inserting for #bjaf in subparagraph 7,a77ii74 7#aa7 ,section #dihj;,i7b77#c77;,c77v77,,ii7 is amended by striking for #aiib in subparagraph 7,b7 and inserting for #bjaf in subparagraph 7,a77ii74 7#ab7 ,section #fjci;,f7d7 is amended by striking subparagraph 7,b7 thereof shall be applied by substituting #aiie for #aiib and inserting subparagraph 7,a77ii7 thereof shall be applied by substituting #aiie for #bjaf4 7#ac7 ,section #ghgb7;g77#e7 is amended to read as follows3 7#e7 ,adjustment of limit for inflation ,in the case of any loan made during any calendar year after #aihf1 the dollar amount in paragraph 7#b7 shall be increased by an amount equal to-- 7,a7 such amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 by substituting calendar year #aihe for calendar year #bjaf in subparagraph 7,a77ii7 thereof4 ,any increase under the preceding sentence shall be rounded to the nearest multiple of #ajj 7or1 if such increase is a multiple of #ej1 such increase shall be increased to the nearest multiple of #ajj74 4 7e7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,,ii ,deduction for qualified business income of pass-thru entities #aajaa4 ,deduction for qualified business income 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a is amended by adding at the end the following new section3 #aii;,a4 ,qualified business income 7a7 ,in general ,in the case of a taxpayer other than a corporation1 there shall be allowed as a deduction for any taxable year an amount equal to the lesser of-- 7#a7 the combined qualified business income amount of the taxpayer1 or 7#b7 an amount equal to #ag4d percent of the excess 7if any7 of-- 7,a7 the taxable income of the taxpayer for the taxable year1 over 7,b7 any net capital gain 7as defined in section #a7;h77 of the taxpayer for the taxable year4 7b7 ,combined qualified business income amount ,for purposes of this section-- 7#a7 ,in general ,the term combined qualified business income amount means1 with respect to any taxable year1 an amount equal to-- 7,a7 the sum of the amounts determined under paragraph 7#b7 for each qualified trade or business carried on by the taxpayer1 plus 7,b7 #ag4d percent of the aggregate amount of the qualified ,,reit dividends and qualified cooperative dividends of the taxpayer for the taxable year4 7#b7 ,determination of deductible amount for each trade or business ,the amount determined under this paragraph with respect to any qualified trade or business is the lesser of-- 7,a7 #ag4d percent of the taxpayer's qualified business income with respect to the qualified trade or business1 or 7,b7 #ej percent of the ,w-#b wages with respect to the qualified trade or business4 7#c7 ,modifications to the wage limit based on taxable income 7,a7 ,exception from wage limit ,in the case of any taxpayer whose taxable income for the taxable year does not exceed the threshold amount1 paragraph 7#b7 shall be applied without regard to subparagraph 7,b74 7,b7 ,phase-in of limit for certain taxpayers 7i7 ,in general ,if-- 7,i7 the taxable income of a taxpayer for any taxable year exceeds the threshold amount1 but does not exceed the sum of the threshold amount plus #ej1jjj 7#ajj1jjj in the case of a joint return71 and 7,,ii7 the amount determined under paragraph 7#b77;,b7 7determined without regard to this subparagraph7 with respect to any qualified trade or business carried on by the taxpayer is less than the amount determined under paragraph 7#b77;,a7 with respect such trade or business1 then paragraph 7#b7 shall be applied with respect to such trade or business without regard to subparagraph 7,b7 thereof and by reducing the amount determined under subparagraph 7,a7 thereof by the amount determined under clause 7ii74 7ii7 ,amount of reduction ,the amount determined under this subparagraph is the amount which bears the same ratio to the excess amount as-- 7,i7 the amount by which the taxpayer's taxable income for the taxable year exceeds the threshold amount1 bears to 7,,ii7 #ej1jjj 7#ajj1jjj in the case of a joint return74 7iii7 ,excess amount ,for purposes of clause 7ii71 the excess amount is the excess of-- 7,i7 the amount determined under paragraph 7#b77;,a7 7determined without regard to this paragraph71 over 7,,ii7 the amount determined under paragraph 7#b77;,b7 7determined without regard to this paragraph74 7#d7 ,wages1 etc 7,a7 ,in general ,the term ,w-#b wages means1 with respect to any person for any taxable year of such person1 the amounts described in paragraphs 7#c7 and 7#h7 of section #fjea7;a7 paid by such person with respect to employment of employees by such person during the calendar year ending during such taxable year4 7,b7 ,limitation to wages attributable to qualified business income ,such term shall not include any amount which is not properly allocable to qualified business income for purposes of subsection 7c77#a74 7,c7 ,return requirement ,such term shall not include any amount which is not properly included in a return filed with the ,social ,security ,administration on or before the #fjth day after the due date 7including extensions7 for such return4 7#e7 ,acquisitions1 dispositions1 and short taxable years ,the ,secretary shall provide for the application of this subsection in cases of a short taxable year or where the taxpayer acquires1 or disposes of1 the major portion of a trade or business or the major portion of a separate unit of a trade or business during the taxable year4 7c7 ,qualified business income ,for purposes of this section-- 7#a7 ,in general ,the term qualified business income means1 for any taxable year1 the net amount of qualified items of income1 gain1 deduction1 and loss with respect to any qualified trade or business of the taxpayer4 7#b7 ,carryover of losses ,if the net amount of qualified income1 gain1 deduction1 and loss with respect to qualified trade or businesses of the taxpayer amount for any taxable year is less than zero1 such amount shall be treated as a loss from a qualified trade or business in the succeeding taxable year4 7#c7 ,qualified items of income1 gain1 deduction1 and loss ,for purposes of this subsection-- 7,a7 ,in general ,the term qualified items of income1 gain1 deduction1 and loss means items of income1 gain1 deduction1 and loss to the extent such items are-- 7i7 effectively connected with the conduct of a trade or business within the ,united ,states 7within the meaning of section #hfd7;c71 determined by substituting qualified trade or business 7within the meaning of section #aii;,a7 for nonresident alien individual or a foreign corporation or for a foreign corporation each place it appears71 and 7ii7 included or allowed in determining taxable income for the taxable year4 7,b7 ,exceptions ,the following investment items shall not be taken into account as a qualified item of income1 gain1 deduction1 or loss3 7i7 ,any item of short-term capital gain1 short-term capital loss1 long-term capital gain1 or long-term capital loss4 7ii7 ,any dividend1 income equivalent to a dividend1 or payment in lieu of dividends described in section #ied7;c77#a77;,g74 7iii7 ,any interest income other than interest income which is properly allocable to a trade or business4 7iv7 ,any item of gain or loss described in subparagraph 7,c7 or 7,d7 of section #ied7;c77#a7 7applied by substituting qualified trade or business for controlled foreign corporation74 7v7 ,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#g774 7vi7 ,any amount received from an annuity which is not received in connection with the trade or business4 7vii7 ,any item of deduction or loss properly allocable to an amount described in any of the preceding clauses4 7#d7 ,treatment of reasonable compensation and guaranteed payments ,qualified business income shall not include-- 7,a7 reasonable compensation paid to the taxpayer by any qualified trade or business of the taxpayer for services rendered with respect to the trade or business1 7,b7 any guaranteed payment described in section #gjg7;c7 paid to a partner for services rendered with respect to the trade or business1 and 7,c7 to the extent provided in regulations1 any payment described in section #gjg7;a7 to a partner for services rendered with respect to the trade or business4 7d7 ,qualified trade or business ,for purposes of this section-- 7#a7 ,in general ,the term qualified trade or business means any trade or business other than a specified service trade or business4 7#b7 ,specified service trade or business 7,a7 ,in general ,the term specified service trade or business means-- 7i7 any trade or business involving the performance of services described in section #abjb7;e77#c77;,a71 including investing and investment management1 trading1 or dealing in securities 7as defined in section #dge7;c77#b771 partnership interests1 or commodities 7as defined in section #dge7;e77#b774 7#c7 ,exception for specified service businesses based on taxpayer's income 7,a7 ,in general ,if1 for any taxable year1 the taxable income of any taxpayer is less than the sum of the threshold amount plus #ej1jjj 7#ajj1jjj in the case of a joint return71 then-- 7i7 the exception under paragraph 7#a7 shall not apply to specified service trades or businesses of the taxpayer for the taxable year1 but 7ii7 only the applicable percentage of qualified items of income1 gain1 deduction1 or loss1 and the ,w-#b wages1 of the taxpayer allocable to such specified service trades or businesses shall be taken into account in computing the qualified business income and ,w-#b wages of the taxpayer for the taxable year for purposes of applying this section4 7,b7 ,applicable percentage ,for purposes of subparagraph 7,a71 the term applicable percentage means1 with respect to any taxable year1 #ajj percent reduced 7not below zero7 by the percentage equal to the ratio of-- 7i7 the taxable income of the taxpayer for the taxable year in excess of the threshold amount1 bears to 7ii7 #ej1jjj 7#ajj1jjj in the case of a joint return74 7e7 ,other definitions ,for purposes of this section-- 7#a7 ,taxable income ,taxable income shall be computed without regard to the deduction allowable under this section4 7#b7 ,threshold amount 7,a7 ,in general ,the term threshold amount means #bej1jjj 7#bjj percent of such amount in the case of a joint return74 7,b7 ,inflation adjustment ,in the case of any taxable year beginning after #bjah1 the dollar amount in paragraph 7#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;f77#c7 for the calendar year in which the taxable year begins4 ,if any amount as increased under the preceding sentence is not a multiple of #a1jjj1 such amount shall be rounded to the nearest multiple of #a1jjj4 7#c7 ,qualified ,,reit dividend ,the term qualified ,,reit dividend means any dividend from a real estate investment trust received during the taxable year which-- 7,a7 is not a capital gain dividend1 as defined in section #heg7;b77#c71 and 7,b7 is not qualified dividend income1 as defined in section #a7;h77#aa74 7#d7 ,qualified cooperative dividend ,the term qualified cooperative dividend means any patronage dividend 7as defined in section #achh7;a771 any per-unit retain allocation 7as defined in section #achh7;f771 and any qualified written notice of allocation 7as defined in section #achh7;c771 or any similar amount received from an organization described in subparagraph 7,b77ii71 which-- 7,a7 is includible in gross income1 and 7,b7 is received from-- 7i7 an organization or corporation described in section #eja7;c77#ab7 or #acha7;a71 or 7ii7 an organization which is governed under this title by the rules applicable to cooperatives under this title before the enactment of subchapter ,t4 7f7 ,special rules 7#a7 ,application to partnerships and ,s corporations 7,a7 ,in general ,in the case of a partnership or ,s corporation-- 7i7 this section shall be applied at the partner or shareholder level1 7ii7 each partner or shareholder shall take into account such person's allocable share of each qualified item of income1 gain1 deduction1 and loss1 and 7iii7 each partner or shareholder shall be treated for purposes of subsection 7b7 as having ,w-#b wages for the taxable year in an amount equal to such person's allocable share of the ,w-#b wages of the partnership or ,s corporation for the taxable year 7as determined under regulations prescribed by the ,secretary74 ,for purposes of clause 7iii71 a partner's or shareholder's allocable share of ,w-#b wages shall be determined in the same manner as the partner's or shareholder's allocable share of wage expenses4 ,for purposes of this subparagraph1 in the case of an ,s corporation1 an allocable share shall be the shareholder's pro rata share of an item4 7,b7 ,application to trusts and estates ,this section shall not apply to any trust or estate4 7,c7 ,treatment of trades or business in ,puerto ,rico 7i7 ,in general ,in the case of any taxpayer with qualified business income from sources within the commonwealth of ,puerto ,rico1 if all such income is taxable under section #a for such taxable year1 then for purposes of determining the qualified business income of such taxpayer for such taxable year1 the term ,united ,states shall include the ,commonwealth of ,puerto ,rico4 7ii7 ,special rule for applying wage limitation ,in the case of any taxpayer described in clause 7i71 the determination of ,w-#b wages of such taxpayer with respect to any qualified trade or business conducted in ,puerto ,rico shall be made without regard to any exclusion under section #cdja7;a77#h7 for remuneration paid for services in ,puerto ,rico4 7#b7 ,coordination with minimum tax ,for purposes of determining alternative minimum taxable income under section #ee1 qualified business income shall be determined without regard to any adjustments under sections #ef through #ei4 7#c7 ,deduction limited to income taxes ,the deduction under subsection 7a7 shall only be allowed for purposes of this chapter4 7#d7 ,regulations ,the ,secretary shall prescribe such regulations as are necessary to carry out the purposes of this section1 including regulations-- 7,a7 for requiring or restricting the allocation of items and wages under this section and such reporting requirements as the ,secretary determines appropriate1 and 7,b7 for the application of this section in the case of tiered entities4 7g7 ,termination ,this section shall not apply to taxable years beginning after ,december #ca1 #bjbe4 4 7b7 ,accuracy-related penalty on determination of applicable percentage ,section #fffb7;d77#a7 is amended by inserting at the end the following new subparagraph3 7,c7 ,special rule for taxpayers claiming section #aii;,a deduction ,in the case of any taxpayer who claims the deduction allowed under section #aii;,a for the taxable year1 subparagraph 7,a7 shall be applied by substituting #e percent for #aj percent4 4 7c7 ,conforming amendments 7#a7 ,section #agj7;b77#b77;,d7 is amended by striking 1 and at the end of clause 7iv71 by redesignating clause 7v7 as clause 7vi71 and by inserting after clause 7iv7 the following new clause3 7v7 section #aii;,a1 and 4 7#b7 ,section #agb7;d7 is amended by adding at the end the following new paragraph3 7#h7 ,qualified business income deduction ,the deduction under section #aii;,a shall not be allowed4 4 7#c7 ,section #bdf7;b77#a7 is amended by inserting #aii;,a1 before #bdc7;a77#a74 7#d7 ,section #fac7;a7 is amended by inserting and without the deduction under section #aii;,a after and without the deduction under section #aii4 7#e7 ,section #fac;,a7d77#a7 is amended by redesignating subparagraphs 7,c71 7,d71 and 7,e7 as subparagraphs 7,d71 7,e71 and 7,f71 respectively1 and by inserting after subparagraph 7,b71 the following new subparagraph3 7,c7 any deduction allowable under section #aii;,a1 4 7#f7 ,the table of sections for part ,,vi of subchapter ,b of chapter #a is amended by inserting at the end the following new item3 ,sec4 #aii;,a4 ,qualified business income4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajab4 ,limitation on losses for taxpayers other than corporations 7a7 ,in general ,section #dfa is amended by adding at the end the following new subsection3 7l7 ,limitation on excess business losses of noncorporate taxpayers 7#a7 ,limitation ,in the case of taxable year of a taxpayer other than a corporation beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf-- 7,a7 subsection 7j7 7relating to limitation on excess farm losses of certain taxpayers7 shall not apply1 and 7,b7 any excess business loss of the taxpayer for the taxable year shall not be allowed4 7#b7 ,disallowed loss carryover ,any loss which is disallowed under paragraph 7#a7 shall be treated as a net operating loss carryover to the following taxable year under section #agb4 7#c7 ,excess business loss ,for purposes of this subsection-- 7,a7 ,in general ,the term excess business loss means the excess 7if any7 of-- 7i7 the aggregate deductions of the taxpayer for the taxable year which are attributable to trades or businesses of such taxpayer 7determined without regard to whether or not such deductions are disallowed for such taxable year under paragraph 7#a771 over 7ii7 the sum of-- 7,i7 the aggregate gross income or gain of such taxpayer for the taxable year which is attributable to such trades or businesses1 plus 7,,ii7 #bej1jjj 7#bjj percent of such amount in the case of a joint return74 7,b7 ,adjustment for inflation ,in the case of any taxable year beginning after ,december #ca1 #bjah1 the #bej1jjj amount in subparagraph 7,a77ii77,,ii7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins4 ,if any amount as increased under the preceding sentence is not a multiple of #a1jjj1 such amount shall be rounded to the nearest multiple of #a1jjj4 7#d7 ,application of subsection in case of partnerships and s corporations ,in the case of a partnership or ,s corporation-- 7,a7 this subsection shall be applied at the partner or shareholder level1 and 7,b7 each partner's or shareholder's allocable share of the items of income1 gain1 deduction1 or loss of the partnership or ,s corporation for any taxable year from trades or businesses attributable to the partnership or ,s corporation shall be taken into account by the partner or shareholder in applying this subsection to the taxable year of such partner or shareholder with or within which the taxable year of the partnership or ,s corporation ends4 ,for purposes of this paragraph1 in the case of an ,s corporation1 an allocable share shall be the shareholder's pro rata share of an item4 7#e7 ,additional reporting ,the ,secretary shall prescribe such additional reporting requirements as the ,secretary determines appropriate to carry out the purposes of this subsection4 7#f7 ,coordination with section #dfi ,this subsection shall be applied after the application of section #dfi4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,,iii ,tax benefits for families and individuals #aajba4 ,increase in standard deduction 7a7 ,in general ,subsection 7c7 of section #fc is amended by adding at the end the following new paragraph3 7#g7 ,special rules for taxable years #bjah through #bjbe ,in the case of a taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf-- 7,a7 ,increase in standard deduction ,paragraph 7#b7 shall be applied-- 7i7 by substituting #ah1jjj for #d1djj in subparagraph 7,b71 and 7ii7 by substituting #ab1jjj for #c1jjj in subparagraph 7,c74 7,b7 ,adjustment for inflation 7i7 ,in general ,paragraph 7#d7 shall not apply to the dollar amounts contained in paragraphs 7#b77;,b7 and 7#b77;,c74 7ii7 ,adjustment of increased amounts ,in the case of a taxable year beginning after #bjah1 the #ah1jjj and #ab1jjj amounts in subparagraph 7,a7 shall each be increased by an amount equal to-- 7,i7 such dollar amount1 multiplied by 7,,ii7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting #bjag for #bjaf in subparagraph 7,a77ii7 thereof4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajbb4 ,increase in and modification of child tax credit 7a7 ,in general ,section #bd is amended by adding at the end the following new subsection3 7h7 ,special rules for taxable years #bjah through #bjbe 7#a7 ,in general ,in the case of a taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf1 this section shall be applied as provided in paragraphs 7#b7 through 7#h74 7#b7 ,credit amount ,subsection 7a7 shall be applied by substituting #b1jjj for #a1jjj4 7#c7 ,limitation ,in lieu of the amount determined under subsection 7b77#b71 the threshold amount shall be #ejj1jjj4 7#d7 ,definition of qualifying child ,paragraph 7#a7 of subsection 7c7 shall be applied by substituting #ah for #ag4 7#e7 ,partial credit allowed for certain other dependents 7,a7 ,in general ,the credit determined under subsection 7a7 7after the application of paragraph 7#b77 shall be increased by #ejj for each dependent of the taxpayer 7as defined in section #aeb7 other than a qualifying child described in subsection 7c7 7after the application of paragraph 7#d774 7,b7 ,exception for certain noncitizens ,subparagraph 7,a7 shall not apply with respect to any individual who would not be a dependent if subparagraph 7,a7 of section #aeb7;b77#c7 were applied without regard to all that follows resident of the ,united ,states4 7#f7 ,maximum amount of refundable credit 7,a7 ,in general ,subsection 7d77#a77;,a7 shall be applied without regard to paragraphs 7#b7 and 7#e7 of this subsection4 7,b7 ,adjustment for inflation ,in the case of a taxable year beginning after #bjag1 subsection 7d77#a77;,a7 shall be applied as if the #a1jjj amount in subsection 7a7 were increased 7but not to exceed the amount under paragraph 7#b7 of this subsection7 by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins4 ,any increase determined under the preceding sentence shall be rounded to the next highest multiple of #ajj4 7#g7 ,earned income threshold for refundable credit ,subsection 7d77#a77;,b77i7 shall be applied by substituting #b1ejj for #c1jjj4 7#h7 ,social security number required ,no credit shall be allowed under subsection 7d7 to a taxpayer with respect to any qualifying child unless the taxpayer includes the social security number of such child on the return of tax for the taxable year4 ,for purposes of the preceding sentence1 the term social security number means a social security number issued to an individual by the ,social ,security ,administration1 but only if the social security number is issued to a citizen of the ,united ,states or is issued 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 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajbc4 ,increased limitation for certain charitable contributions 7a7 ,in general ,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 beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf1 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 7i7 for any taxable year described in such clause1 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 7a7 and 7b7 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 for each taxable year described in clause 7i71 and each taxable year to which any contribution under this subparagraph is carried over under clause 7ii71 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 ,effective date ,the amendment made by this section shall apply to contributions in taxable years beginning after ,december #ca1 #bjag4 #aajbd4 ,increased contributions to ,,able accounts 7a7 ,increase in limitation for contributions from compensation of individuals with disabilities 7#a7 ,in general ,section #ebi;,a7b77#b77;,b7 is amended to read as follows3 7,b7 except in the case of contributions under subsection 7c77#a77;,c71 if such contribution to an ,,able account would result in aggregate contributions from all contributors to the ,,able account for the taxable year exceeding the sum of-- 7i7 the amount in effect under section #bejc7;b7 for the calendar year in which the taxable year begins1 plus 7ii7 in the case of any contribution by a designated beneficiary described in paragraph 7#g7 before ,january #a1 #bjbf1 the lesser of-- 7,i7 compensation 7as defined by section #bai7;f77#a77 includible in the designated beneficiary's gross income for the preceding taxable year1 or 7,,ii7 an amount equal to the poverty line for a one-person household1 as determined for the calendar year preceding the calendar year in which the taxable year begins4 4 7#b7 ,eligible designated beneficiary ,section #ebi;,a7b7 is amended by adding at the end the following3 7#g7 ,special rules related to contribution limit ,for purposes of paragraph 7#b77;,b77ii7-- 7,a7 ,designated beneficiary ,a designated beneficiary described in this paragraph is an employee 7including an employee within the meaning of section #dja7;c77 with respect to whom-- 7i7 no contribution is made for the taxable year to a defined contribution plan 7within the meaning of section #dad7;i77 with respect to which the requirements of section #dja7;a7 or #djc7;a7 are met1 7ii7 no contribution is made for the taxable year to an annuity contract described in section #djc7;b71 and 7iii7 no contribution is made for the taxable year to an eligible deferred compensation plan described in section #deg7;b74 7,b7 ,poverty line ,the term poverty line has the meaning given such term by section #fgc of the ,community ,services ,block ,grant ,act 7#db ,u4,s4,c4 #iijb74 4 7b7 ,allowance of saver's credit for ,,able contributions by account holder ,section #be;,b7d77#a7 is amended by striking and at the end of subparagraph 7,b77ii71 by striking the period at the end of subparagraph 7,c7 and inserting 1 and1 and by inserting at the end the following3 7,d7 the amount of contributions made before ,january #a1 #bjbf1 by such individual to the ,,able account 7within the meaning of section #ebi;,a7 of which such individual is the designated beneficiary4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4 #aajbe4 ,rollovers to ,,able programs from #ebi programs 7a7 ,in general ,clause 7i7 of section #ebi7;c77#c77;,c7 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 following3 7,,iii7 before ,january #a1 #bjbf1 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 the date of the enactment of this ,act4 #aajbf4 ,treatment of certain individuals performing services in the ,sinai ,peninsula of ,egypt 7a7 ,in general ,for purposes of the following provisions of the ,internal ,revenue ,code of #aihf1 with respect to the applicable period1 a qualified hazardous duty area shall be treated in the same manner as if it were a combat zone 7as determined under section #aab of such ,code73 7#a7 ,section #b7;a77#c7 7relating to special rule where deceased spouse was in missing status74 7#b7 ,section #aab 7relating to the exclusion of certain combat pay of members of the ,armed ,forces74 7#c7 ,section #fib 7relating to income taxes of members of ,armed ,forces on death74 7#d7 ,section #bbja 7relating to members of the ,armed ,forces dying in combat zone or by reason of combat-zone-incurred wounds1 etc474 7#e7 ,section #cdja7;a77#a7 7defining wages relating to combat pay for members of the ,armed ,forces74 7#f7 ,section #dbec7;d7 7relating to the taxation of phone service originating from a combat zone from members of the ,armed ,forces74 7#g7 ,section #fjac7;f77#a7 7relating to joint return where individual is in missing status74 7#h7 ,section #gejh 7relating to time for performing certain acts postponed by reason of service in combat zone74 7b7 ,qualified hazardous duty area ,for purposes of this section1 the term qualified hazardous duty area means the ,sinai ,peninsula of ,egypt1 if as of the date of the enactment of this section any member of the ,armed ,forces of the ,united ,states is entitled to special pay under section #caj of title #cg1 ,united ,states ,code 7relating to special pay2 duty subject to hostile fire or imminent danger71 for services performed in such location4 ,such term includes such location only during the period such entitlement is in effect4 7c7 ,applicable period 7#a7 ,in general ,except as provided in paragraph 7#b71 the applicable period is-- 7,a7 the portion of the first taxable year ending after ,june #i1 #bjae1 which begins on such date1 and 7,b7 any subsequent taxable year beginning before ,january #a1 #bjbf4 7#b7 ,withholding ,in the case of subsection 7a77#e71 the applicable period is-- 7,a7 the portion of the first taxable year ending after the date of the enactment of this ,act which begins on such date1 and 7,b7 any subsequent taxable year beginning before ,january #a1 #bjbf4 7d7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the provisions of this section shall take effect on ,june #i1 #bjae4 7#b7 ,withholding ,subsection 7a77#e7 shall apply to remuneration paid after the date of the enactment of this ,act4 #aajbg4 ,extension of waiver of limitations with respect to excluding from gross income amounts received by wrongfully incarcerated individuals 7a7 ,in general ,section #cjd7;d7 of the ,protecting ,americans from ,tax ,hikes ,act of #bjae 7#bf ,u4,s4,c4 #aci;,f note7 is amended by striking #a-year and inserting #b-year4 7b7 ,effective date ,the amendments made by this section shall take effect on the date of the enactment of this ,act4 #aajbh4 ,unborn children allowed as #ebi account beneficiaries 7a7 ,in general ,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 7b7 ,effective date ,the amendment made by this section shall apply to contributions made after ,december #ca1 #bjag4 #aajbi4 ,relief for ,mississippi ,river ,delta flood disaster area 7a7 ,in general ,for purposes of this section1 the term ,mississippi ,river ,delta flood disaster area means any area-- 7#a7 with respect to which a major disaster has been declared by the ,president under section #dja of the ,robert ,t4 ,stafford ,disaster ,relief and ,emergency ,assistance ,act before ,september #c1 #bjaf1 by reason of severe storms and flooding occurring in ,louisiana during ,august of #bjaf1 or 7#b7 with respect to which a major disaster has been declared by the ,president under section #dja of the ,robert ,t4 ,stafford ,disaster ,relief and ,emergency ,assistance ,act before ,march #ca1 #bjaf1 by reason of severe storms and flooding occurring in ,louisiana1 ,texas1 and ,mississippi during ,march of #bjaf4 7b7 ,special rules for use of retirement funds with respect to ,mississippi ,delta areas damaged by #bjaf flooding 7#a7 ,tax-,favored ,withdrawals ,from ,retirement ,plans 7,a7 ,in general ,section #gb7t7 of the ,internal ,revenue ,code of #aihf shall not apply to any qualified ,mississippi ,river ,delta flooding distribution4 7,b7 ,aggregate dollar limitation 7i7 ,in general ,for purposes of this subsection1 the aggregate amount of distributions received by an individual which may be treated as qualified ,mississippi ,river ,delta flooding distributions for any taxable year shall not exceed the excess 7if any7 of-- 7,i7 #ajj1jjj1 over 7,,ii7 the aggregate amounts treated as qualified ,mississippi ,river ,delta flooding distributions received by such individual for all prior taxable years4 7ii7 ,treatment of plan distributions ,if a distribution to an individual would 7without regard to clause 7i77 be a qualified ,mississippi ,river ,delta flooding distribution1 a plan shall not be treated as violating any requirement of this title merely because the plan treats such distribution as a qualified ,mississippi ,river ,delta flooding distribution1 unless the aggregate amount of such distributions from all plans maintained by the employer 7and any member of any controlled group which includes the employer7 to such individual exceeds #ajj1jjj4 7iii7 ,controlled group ,for purposes of clause 7ii71 the term controlled group means any group treated as a single employer under subsection 7b71 7c71 7m71 or 7o7 of section #dad of the ,internal ,revenue ,code of #aihf4 7,c7 ,amount distributed may be repaid 7i7 ,in general ,any individual who receives a qualified ,mississippi ,river ,delta flooding distribution may1 at any time during the #c-year period beginning on the day after the date on which such distribution was received1 make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section #djb7;c71 #djc7;a77#d71 #djc7;b77#h71 #djh7;d77#c71 or #deg7;e77#af7 of the ,internal ,revenue ,code of #aihf1 as the case may be4 7ii7 ,treatment of repayments of distributions from eligible retirement plans other than iras ,for purposes of this title1 if a contribution is made pursuant to clause 7i7 with respect to a qualified ,mississippi ,river ,delta flooding distribution from an eligible retirement plan other than an individual retirement plan1 then the taxpayer shall1 to the extent of the amount of the contribution1 be treated as having received the qualified ,mississippi ,river ,delta flooding distribution in an eligible rollover distribution 7as defined in section #djb7;c77#d7 of the ,internal ,revenue ,code of #aihf7 and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within #fj days of the distribution4 7iii7 ,treatment of repayments for distributions from iras ,for purposes of the ,internal ,revenue ,code of #aihf1 if a contribution is made pursuant to clause 7i7 with respect to a qualified ,mississippi ,river ,delta flooding distribution from an individual retirement plan 7as defined by section #ggja7;a77#cg7 of the ,internal ,revenue ,code of #aihf71 then1 to the extent of the amount of the contribution1 the qualified ,mississippi ,river ,delta flooding distribution shall be treated as a distribution described in section #djh7;d77#c7 of such ,code and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within #fj days of the distribution4 7,d7 ,definitions ,for purposes of this paragraph-- 7i7 ,qualified ,mississippi ,river ,delta flooding distribution ,except as provided in subparagraph 7,b71 the term qualified ,mississippi ,river ,delta flooding distribution means-- 7,i7 any distribution from an eligible retirement plan made on or after ,august #aa1 #bjaf1 and before ,january #a1 #bjah1 to an individual whose principal place of abode on ,august #aa1 #bjaf1 was located in the portion of ,mississippi ,river ,delta disaster area described in subsection 7a77#a7 and who has sustained an economic loss by reason of the severe storms and flooding giving rise to the ,presidential declaration described in subsection 7a77#a71 or 7,,ii7 any distribution from an eligible retirement plan made on or after ,march #a1 #bjaf1 and before ,january #a1 #bjah1 to an individual whose principal place of abode on ,march #a1 #bjaf1 was located in the portion of ,mississippi ,river ,delta disaster area described in subsection 7a77#b7 and who has sustained an economic loss by reason of the severe storms and flooding giving rise to the ,presidential declaration described in subsection 7a77#b74 7ii7 ,eligible retirement plan ,the term eligible retirement plan shall have the meaning given such term by section #djb7;c77#h77;,b7 of the ,internal ,revenue ,code of #aihf4 7,e7 ,income inclusion spread over #c-year period 7i7 ,in general ,in the case of any qualified ,mississippi ,river ,delta flooding distribution1 unless the taxpayer elects not to have this subparagraph apply for any taxable year1 any amount required to be included in gross income for such taxable year shall be so included ratably over the #c-taxable-year period beginning with such taxable year4 7ii7 ,special rule ,for purposes of clause 7i71 rules similar to the rules of subparagraph 7,e7 of section #djh;,a7d77#c7 of the ,internal ,revenue ,code of #aihf shall apply4 7,f7 ,special rules 7i7 ,exemption of distributions from trustee to trustee transfer and withholding rules ,for purposes of sections #dja7;a77#ca71 #djb7;f71 and #cdje of the ,internal ,revenue ,code of #aihf1 qualified ,mississippi ,river ,delta flooding distributions shall not be treated as eligible rollover distributions4 7ii7 ,qualified ,mississippi ,river ,delta flooding distributions treated as meeting plan distribution requirements ,for purposes of the ,internal ,revenue ,code of #aihf1 a qualified ,mississippi ,river ,delta flooding distribution shall be treated as meeting the requirements of sections #dja7k77#b77;,b77i71 #djc7;b77#g77;,a77ii71 #djc7;b77#aa71 and #deg7;d77#a77;,a7 of the ,internal ,revenue ,code of #aihf4 7#b7 ,provisions ,relating to ,plan ,amendments 7,a7 ,in general ,if this paragraph applies to any amendment to any plan or annuity contract1 such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in subparagraph 7,b77ii77,i74 7,b7 ,amendments to which subsection applies 7i7 ,in general ,this paragraph shall apply to any amendment to any plan or annuity contract which is made-- 7,i7 pursuant to any provision of this section1 or pursuant to any regulation under any provision of this section2 and 7,,ii7 on or before the last day of the first plan year beginning on or after ,january #a1 #bjah1 or such later date as the ,secretary prescribes4 ,in the case of a governmental plan 7as defined in section #dad7;d7 of the ,internal ,revenue ,code of #aihf71 subclause 7,,ii7 shall be applied by substituting the date which is #b years after the date otherwise applied under subclause 7,,ii74 7ii7 ,conditions ,this paragraph shall not apply to any amendment unless-- 7,i7 during the period-- 7aa7 beginning on the date that this section or the regulation described in clause 7i77,i7 takes effect 7or in the case of a plan or contract amendment not required by this section or such regulation1 the effective date specified by the plan72 and 7bb7 ending on the date described in clause 7i77,,ii7 7or1 if earlier1 the date the plan or contract amendment is adopted71 the plan or contract is operated as if such plan or contract amendment were in effect2 and 7,,ii7 such plan or contract amendment applies retroactively for such period4 7c7 ,special rules for personal casualty losses related to ,louisiana severe storms and flooding 7#a7 ,in general ,if an individual has a net disaster loss for any taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf-- 7,a7 the amount determined under section #afe7;h77#b77;,a77ii7 of the ,internal ,revenue ,code of #aihf shall be equal to the sum of-- 7i7 such net disaster loss1 and 7ii7 so much of the excess referred to in the matter preceding clause 7i7 of section #afe7;h77#b77;,a7 of such ,code 7reduced by the amount in clause 7i7 of this subparagraph7 as exceeds #aj percent of the adjusted gross income of the individual1 7,b7 section #afe7;h77#a7 of such ,code shall be applied by substituting #ejj for #ejj 7#ajj for taxable years beginning after ,december #ca1 #bjji71 7,c7 the standard deduction determined under section #fc7;c7 of such ,code shall be increased by the net disaster loss1 and 7,d7 section #ef7;b77#a77;,e7 of such ,code shall not apply to so much of the standard deduction as is attributable to the increase under subparagraph 7,c7 of this paragraph4 7#b7 ,net disaster loss ,for purposes of this subsection1 the term net disaster loss means the excess of qualified disaster-related personal casualty losses over personal casualty gains 7as defined in section #afe7;h77#c77;,a7 of the ,internal ,revenue ,code of #aihf74 7#c7 ,qualified disaster-related personal casualty losses ,for purposes of this paragraph1 the term qualified disaster-related personal casualty losses means losses described in section #afe7;c77#c7 of the ,internal ,revenue ,code of #aihf which arise-- 7,a7 in the portion of the ,mississippi ,river ,delta flood disaster area described in subsection 7a77#a7 on or after ,august #aa1 #bjaf1 and which are attributable to the severe storms and flooding giving rise to the ,presidential declaration described in subsection 7a77#a71 or 7,b7 in the portion of the ,mississippi ,river ,delta flood disaster area described in subsection 7a77#b7 on or after ,march #a1 #bjaf1 and which are attributable to the severe storms and flooding giving rise to the ,presidential declaration described in subsection 7a77#b74 ,,iv ,education #aajca4 ,treatment of student loans discharged on account of death or disability 7a7 ,in general ,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 for any taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf1 does not include any amount which 7but for this subsection7 would be includible in gross income for such taxable year 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 ,effective date ,the amendment made by this section shall apply to discharges of indebtedness after ,december #ca1 #bjag4 #aajcb4 ,increase in deduction for teacher expenses 7a7 ,in general ,subparagraph 7,d7 of section #fb7;a77#b7 is amended by striking #bej and inserting #bej 7#ejj in the case of taxable years beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf74 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,v ,deductions and exclusions #aajda4 ,suspension of deduction for personal exemptions 7a7 ,in general ,subsection 7d7 of section #aea is amended-- 7#a7 by striking ,in the case of in paragraph 7#d7 and inserting ,except as provided in paragraph 7#e71 in the case of1 and 7#b7 by adding at the end the following new paragraph3 7#e7 ,special rules for taxable years #bjah through #bjbe ,in the case of a taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf-- 7,a7 ,exemption amount ,the term exemption amount means zero4 7,b7 ,references ,for purposes of any other provision of this title1 the reduction of the exemption amount to zero under subparagraph 7,a7 shall not be taken into account in determining whether a deduction is allowed or allowable1 or whether a taxpayer is entitled to a deduction1 under this section4 4 7b7 ,application to estates and trusts ,section #fdb7;b77#b77;,c7 is amended by adding at the end the following new clause3 7iii7 ,years when personal exemption amount is zero 7,i7 ,in general ,in the case of any taxable year in which the exemption amount under section #aea7;d7 is zero1 clause 7i7 shall be applied by substituting #d1aej for the exemption amount under section #aea7;d74 7,,ii7 ,inflation adjustment ,in the case of any calendar year beginning after #bjah1 the #d1aej amount in subparagraph 7,a7 shall be increased by an amount equal to-- 7aa7 such dollar amount1 multiplied by 7bb7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting #bjag for #bjaf in subparagraph 7,a77ii7 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 7c7 ,exception for wage withholding rules ,section #cdjb7;a7 is amended by adding at the end the following new paragraph3 7#c7 ,years when personal exemption amount is zero 7,a7 ,in general ,in the case of any taxable year in which the exemption amount under section #aea7;d7 is zero1 paragraph 7#b7 shall be applied by substituting #d1aej for the amount of one personal exemption provided in section #aea7;b74 7,b7 ,inflation adjustment ,in the case of any calendar year beginning after #bjah1 the #d1aej amount in subparagraph 7,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;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting #bjag for #bjaf in subparagraph 7,a77ii7 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 7d7 ,exception for determining property exempt from levy ,section #fccd7;d7 is amended by adding at the end the following new paragraph3 7#d7 ,years when personal exemption amount is zero 7,a7 ,in general ,in the case of any taxable year in which the exemption amount under section #aea7;d7 is zero1 paragraph 7#b7 shall not apply and for purposes of paragraph 7#a7 the term exempt amount means an amount equal to-- 7i7 the sum of the amount determined under subparagraph 7,b7 and the standard deduction1 divided by 7ii7 #eb4 7,b7 ,amount determined ,for purposes of subparagraph 7,a71 the amount determined under this subparagraph is #d1aej multiplied by the number of the taxpayer's dependents for the taxable year in which the levy occurs4 7,c7 ,inflation adjustment ,in the case of any taxable year beginning after #bjah1 the #d1aej amount in subparagraph 7,b7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting #bjag for #bjaf in subparagraph 7,a77ii7 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 7,d7 ,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 7e7 ,persons required to make returns of income ,section #fjab is amended by adding at the end the following new subsection3 7f7 ,special rule for taxable years #bjah through #bjbe ,in the case of a taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf1 subsection 7a77#a7 shall not apply1 and every individual who has gross income for the taxable year shall be required to make returns with respect to income taxes under subtitle ,a1 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-- 7,a7 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 7,b7 such individual and such individual's spouse have the same household as their home at the close of the taxable year1 7,c7 such individual's spouse does not make a separate return1 and 7,d7 neither such individual nor such individual's spouse is an individual described in section #fc7;c77#e7 who has income 7other than earned income7 in excess of the amount in effect under section #fc7;c77#e77;,a74 ,the amount specified in paragraph 7#a7 or 7#b77;,a7 shall be increased by the amount of #a additional standard deduction 7within the meaning of section #fc7;c77#c77 in the case of an individual entitled to such deduction by reason of section #fc7;f77#a77;,a7 7relating to individuals age #fe or more71 and by the amount of each additional standard deduction to which the individual or the individual's spouse is entitled by reason of section #fc7;f77#a74 4 7f7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajdb4 ,suspension of deduction for ,state and local1 etc4 taxes 7a7 ,in general ,subsection 7b7 of section #afd is amended by adding at the end the following new paragraph3 7#f7 ,suspension of individual deductions for taxable years #bjah through #bjbe ,in the case of an individual and a taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf-- 7,a7 paragraphs 7#a7 and 7#b7 of subsection 7a7 shall not apply to any real property or personal property taxes1 other than taxes which are paid or accrued in carrying on a trade or business or an activity described in section #bab1 and 7,b7 subsection 7a77#c7 shall not apply to any ,state or local taxes4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajdc4 ,suspension of deduction for home equity interest 7a7 ,in general ,section #afc7;h77#c77;,a77ii7 is amended by inserting in the case of taxable years beginning before ,january #a1 #bjah1 or after ,december #ca1 #bjbe1 before home equity indebtedness4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years ending after ,december #ca1 #bjag4 #aajdd4 ,modification of deduction for personal casualty losses 7a7 ,in general ,subsection 7h7 of section #afe is amended by adding at the end the following new paragraph3 7#e7 ,limitation for taxable years #bjah through #bjbe ,in the case of any loss of an individual described in subsection 7c77#c7 which 7but for this paragraph7 would be deductible in a taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf 7without regard to any election under subsection 7i71 such loss shall be allowed only to the extent it is attributable to a ,federally declared disaster 7as defined in subsection 7i77#e774 ,the preceding sentence shall not apply to any deduction under section #agb which is carried to such a taxable year from a taxable year beginning before ,january #a1 #bjah4 4 7b7 ,effective date ,the amendment made by this section shall apply to losses incurred in taxable years beginning after ,december #ca1 #bjag4 #aajde4 ,suspension of miscellaneous itemized deductions 7a7 ,in general ,section #fg is amended by adding at the end the following new subsection3 7g7 ,suspension for taxable years #bjah through #bjbe ,notwithstanding subsection 7a71 no miscellaneous itemized deduction shall be allowed for any taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajdf4 ,suspension of overall limitation on itemized deductions 7a7 ,in general ,section #fh is amended by adding at the end the following new subsection3 7f7 ,section not to apply ,this section shall not apply to any taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajdg4 ,modification of exclusion of gain from sale of principal residence 7a7 ,in general ,section #aba is amended by adding at the end the following new subsection3 7h7 ,special rules for sales or exchanges in taxable years #bjah through #bjbe 7#a7 ,in general ,in applying this section with respect to sales or exchanges after ,december #ca1 #bjag1 and before ,january #a1 #bjbf-- 7,a7 #h-year shall be substituted for #e-year each place it appears in subsections 7a71 7b77#e77;,c77ii77,i71 and 7c77#a77;,b77i77,i7 and paragraphs 7#g71 7#i71 7#aj71 and 7#ab7 of subsection 7d71 7,b7 #e years shall be substituted for #b years each place it appears in subsections 7a71 7b77#c71 7b77#d71 7b77#e77;,c77ii77,,iii71 and 7c77#a77;,b77ii71 and 7,c7 #e-year shall be substituted for #b-year in subsection 7b77#c74 7#b7 ,exception for binding contracts ,paragraph 7#a7 shall not apply to any sale or exchange with respect to which there was a written binding contract in effect before ,january #a1 #bjah1 and at all times thereafter before the sale or exchange4 4 7b7 ,effective date ,the amendment made by this section shall apply to sales and exchanges after ,december #ca1 #bjag4 #aajdh4 ,suspension of exclusion for qualified bicycle commuting reimbursement 7a7 ,in general ,section #acb7;f7 is amended by adding at the end the following new paragraph3 7#h7 ,suspension of qualified bicycle commuting reimbursement exclusion ,paragraph 7#a77;,d7 shall not apply to any taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajdi4 ,suspension of exclusion for qualified moving expense reimbursement 7a7 ,in general ,section #acb7;g7 is amended-- 7#a7 by striking ,for purposes of this section1 the term and inserting 8,for purposes of this section-- 7#a7 ,in general ,the term 1 and 7#b7 by adding at the end the following new paragraph3 7#b7 ,suspension for taxable years #bjah through #bjbe ,except in the case of a member of the ,armed ,forces of the ,united ,states on active duty who moves pursuant to a military order and incident to a permanent change of station1 subsection 7a77#f7 shall not apply to any taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajej4 ,suspension of deduction for moving expenses 7a7 ,in general ,section #bag is amended by adding at the end the following new subsection3 7k7 ,suspension of deduction for taxable years #bjah through #bjbe ,except in the case of an individual to whom subsection 7g7 applies1 this section shall not apply to any taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajea4 ,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 in the case of taxable years beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf1 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 amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,,vi ,increase in estate and gift tax exemption #aajfa4 ,increase in estate and gift tax exemption 7a7 ,in general ,section #bjaj7;c77#c7 is amended by adding at the end the following new subparagraph3 7,c7 ,increase in basic exclusion amount ,in the case of estates of decedents dying or gifts made after ,december #ca1 #bjag1 and before ,january #a1 #bjbf1 subparagraph 7,a7 shall be applied by substituting #aj1jjj1jjj for #e1jjj1jjj4 4 7b7 ,conforming amendment ,subsection 7g7 of section #bjja is amended to read as follows3 7g7 ,modifications to tax payable 7#a7 ,modifications to gift tax payable to reflect different tax rates ,for purposes of applying subsection 7b77#b7 with respect to #a or more gifts1 the rates of tax under subsection 7c7 in effect at the decedent's death shall1 in lieu of the rates of tax in effect at the time of such gifts1 be used both to compute-- 7,a7 the tax imposed by chapter #ab with respect to such gifts1 and 7,b7 the credit allowed against such tax under section #beje1 including in computing-- 7i7 the applicable credit amount under section #beje7;a77#a71 and 7ii7 the sum of the amounts allowed as a credit for all preceding periods under section #beje7;a77#b74 7#b7 ,modifications to estate tax payable to reflect different basic exclusion amounts ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out this section with respect to any difference between-- 7,a7 the basic exclusion amount under section #bjaj7;c77#c7 applicable at the time of the decedent's death1 and 7,b7 the basic exclusion amount under such section applicable with respect to any gifts made by the decedent4 4 7c7 ,effective date ,the amendments made by this section shall apply to estates of decedents dying and gifts made after ,december #ca1 #bjag4 ,,vii ,taxpayer rights and tax administration #aajga4 ,extension of time limit for contesting ,,irs levy 7a7 ,extension of ,time for ,return of ,property ,subject to ,levy ,subsection 7b7 of section #fcdc is amended by striking #i months and inserting #b years4 7b7 ,period of ,limitation on ,suits ,subsection 7c7 of section #fecb is amended-- 7#a7 by striking #i months in paragraph 7#a7 and inserting #b years1 and 7#b7 by striking #i-month in paragraph 7#b7 and inserting #b-year4 7c7 ,effective ,date ,the amendments made by this section shall apply to-- 7#a7 levies made after the date of the enactment of this ,act1 and 7#b7 levies made on or before such date if the #i-month period has not expired under section #fcdc7;b7 of the ,internal ,revenue ,code of #aihf 7without regard to this section7 as of such date4 #aajgb4 ,individuals held harmless on improper levy on retirement plans 7a7 ,in ,general ,section #fcdc is amended by adding at the end the following new subsection3 7f7 ,individuals ,held ,harmless on ,wrongful ,levy1 etc4 on ,retirement ,plan 7#a7 ,in general ,if the ,secretary determines that an individual's account or benefit under an eligible retirement plan 7as defined in section #djb7;c77#h77;,b77 has been levied upon in a case to which subsection 7b7 or 7d77#b77;,a7 applies and property or an amount of money is returned to the individual-- 7,a7 the individual may contribute such property or an amount equal to the sum of-- 7i7 the amount of money so returned by the ,secretary1 and 7ii7 interest paid under subsection 7c7 on such amount of money1 into such eligible retirement plan if such contribution is permitted by the plan1 or into an individual retirement plan 7other than an endowment contract7 to which a rollover contribution of a distribution from such eligible retirement plan is permitted1 but only if such contribution is made not later than the due date 7not including extensions7 for filing the return of tax for the taxable year in which such property or amount of money is returned1 and 7,b7 the ,secretary shall1 at the time such property or amount of money is returned1 notify such individual that a contribution described in subparagraph 7,a7 may be made4 7#b7 ,treatment as rollover ,the distribution on account of the levy and any contribution under paragraph 7#a7 with respect to the return of such distribution shall be treated for purposes of this title as if such distribution and contribution were described in section #djb7;c71 #djb;,a7c77#c71 #djc7;a77#d71 #djc7;b77#h71 #djh7;d77#c71 #djh;,a7d77#c71 or #deg7;e77#af71 whichever is applicable2 except that-- 7,a7 the contribution shall be treated as having been made for the taxable year in which the distribution on account of the levy occurred1 and the interest paid under subsection 7c7 shall be treated as earnings within the plan after the contribution and shall not be included in gross income1 and 7,b7 such contribution shall not be taken into account under section #djh7;d77#c77;,b74 7#c7 ,refund1 etc41 of income tax on levy 7,a7 ,in general ,if any amount is includible in gross income for a taxable year by reason of a distribution on account of a levy referred to in paragraph 7#a7 and any portion of such amount is treated as a rollover contribution under paragraph 7#b71 any tax imposed by chapter #a on such portion shall not be assessed1 and if assessed shall be abated1 and if collected shall be credited or refunded as an overpayment made on the due date for filing the return of tax for such taxable year4 7,b7 ,exception ,subparagraph 7,a7 shall not apply to a rollover contribution under this subsection which is made from an eligible retirement plan which is not a ,roth ,,ira or a designated ,roth account 7within the meaning of section #djb;,a7 to a ,roth ,,ira or a designated ,roth account under an eligible retirement plan4 7#d7 ,interest ,notwithstanding subsection 7d71 interest shall be allowed under subsection 7c7 in a case in which the ,secretary makes a determination described in subsection 7d77#b77;,a7 with respect to a levy upon an individual retirement plan4 7#e7 ,treatment of inherited accounts ,for purposes of paragraph 7#a77;,a71 section #djh7;d77#c77;,c7 shall be disregarded in determining whether an individual retirement plan is a plan to which a rollover contribution of a distribution from the plan levied upon is permitted4 4 7b7 ,effective date ,the amendment made by this section shall apply to amounts paid under subsections 7b71 7c71 and 7d77#b77;,a7 of section #fcdc of the ,internal ,revenue ,code of #aihf in taxable years beginning after ,december #ca1 #bjag4 #aajgc4 ,modification of user fee requirements for installment agreements 7a7 ,in general ,section #faei is amended by redesignating subsection 7f7 as subsection 7g7 and by inserting after subsection 7e7 the following new subsection3 7f7 ,installment agreement fees 7#a7 ,limitation on fee amount ,the amount of any fee imposed on an installment agreement under this section may not exceed the amount of such fee as in effect on the date of the enactment of this subsection4 7#b7 ,waiver or reimbursement ,in the case of any taxpayer with an adjusted gross income1 as determined for the most recent year for which such information is available1 which does not exceed #bej percent of the applicable poverty level 7as determined by the ,secretary7-- 7,a7 if the taxpayer has agreed to make payments under the installment agreement by electronic payment through a debit instrument1 no fee shall be imposed on an installment agreement under this section1 and 7,b7 if the taxpayer is unable to make payments under the installment agreement by electronic payment through a debit instrument1 the ,secretary shall1 upon completion of the installment agreement1 pay the taxpayer an amount equal to any such fees imposed4 4 7b7 ,effective date ,the amendments made by this section shall apply to agreements entered into on or after the date which is #fj days after the date of the enactment of this ,act4 #aajgd4 ,form #ajdj,,sr for seniors 7a7 ,in general ,the ,secretary of the ,treasury 7or the ,secretary's delegate7 shall make available a form1 to be known as ,form #ajdj,,sr1 for use by individuals to file the return of tax imposed by chapter #a of the ,internal ,revenue ,code of #aihf4 ,such form shall be as similar as practicable to ,form #ajdj;,,ez1 except that-- 7#a7 the form shall be available only to individuals who have attained age #fe as of the close of the taxable year1 7#b7 the form may be used even if income for the taxable year includes-- 7,a7 social security benefits 7as defined in section #hf7;d7 of the ,internal ,revenue ,code of #aihf71 7,b7 distributions from qualified retirement plans 7as defined in section #digd7;c7 of such ,code71 annuities or other such deferred payment arrangements1 7,c7 interest and dividends1 or 7,d7 capital gains and losses taken into account in determining adjusted net capital gain 7as defined in section #a7;h77#c7 of such ,code71 and 7#c7 the form shall be available without regard to the amount of any item of taxable income or the total amount of taxable income for the taxable year4 7b7 ,effective date ,the form required by subsection 7a7 shall be made available for taxable years beginning after the date of the enactment of this ,act and ending before ,january #a1 #bjbf4 #aajge4 ,sense of the ,senate on improving customer service and protections for taxpayers by reinstating appropriate funding levels ,it is the sense of the ,senate that politically motivated budget cuts-- 7#a7 are counterproductive to deficit reduction1 7#b7 diminish the ability of the ,internal ,revenue ,service to adequately serve taxpayers and protect taxpayer information1 and 7#c7 reduce the ability of the ,internal ,revenue ,service to enforce the law4 #aajgf4 ,return preparation programs for low-income taxpayers 7a7 ,in general ,chapter #gg is amended by inserting after section #gebf the following new section3 #gebf;,a4 ,return preparation programs for low-income taxpayers 7a7 ,volunteer ,income ,tax ,assistance ,matching ,grant ,program 7#a7 ,establishment of ,program ,the ,secretary1 through the ,internal ,revenue ,service1 shall establish a ,community ,volunteer ,income ,tax ,assistance ,matching ,grant ,program 7hereinafter in this section referred to as the ,,vita grant program74 ,except as otherwise provided in this section1 the ,,vita grant program shall be administered in a manner which is substantially similar to the ,community ,volunteer ,income ,tax ,assistance matching grants demonstration program established under title ,i of division ,d of the ,consolidated ,appropriations ,act1 #bjjh4 7#b7 ,matching grants 7,a7 ,in general ,the ,secretary shall1 subject to the availability of appropriated funds1 make available grants under the ,,vita grant program to provide matching funds for the development1 expansion1 or continuation of qualified return preparation programs assisting low-income taxpayers and members of underserved populations4 7,b7 ,application 7i7 ,in general ,subject to clause 7ii71 in order to be eligible for a grant under this section1 a qualified return preparation program shall submit an application to the ,secretary at such time1 in such manner1 and containing such information as the ,secretary reasonably requires4 7ii7 ,accuracy review ,in the case of any qualified return preparation program which was awarded a grant under this section and was subsequently subject to a field site visit by the ,internal ,revenue ,service 7including through the ,stakeholder ,partnerships1 ,education1 and ,communication office7 in which it was determined that the average accuracy rate for preparation of tax returns through such program was less than #ij percent1 such program shall not be eligible for any additional grants under this section unless such program provides1 as part of their application1 sufficient documentation regarding the corrective measures established by such program to address the deficiencies identified following the field site visit4 7,c7 ,priority ,in awarding grants under this section1 the ,secretary shall give priority to applications-- 7i7 demonstrating assistance to low-income taxpayers1 with emphasis on outreach to and services for such taxpayers1 7ii7 demonstrating taxpayer outreach and educational activities relating to eligibility and availability of income supports available through the ,internal ,revenue ,code of #aihf1 such as the earned income tax credit1 and 7iii7 demonstrating specific outreach and focus on one or more underserved populations4 7,d7 ,duration of grants ,upon application of a qualified return preparation program1 the ,secretary is authorized to award a multi-year grant not to exceed #c years4 7#c7 ,aggregate limitation ,unless otherwise provided by specific appropriation1 the ,secretary shall not allocate more than #cj1jjj1jjj per fiscal year 7exclusive of costs of administering the program7 to carry out the purposes of this section4 7b7 ,use of funds 7#a7 ,in general ,qualified return preparation programs receiving a grant under this section may use the grant for-- 7,a7 ordinary and necessary costs associated with program operation in accordance with ,cost ,principles ,circulars as set forth by the ,office of ,management and ,budget1 including-- 7i7 for wages or salaries of persons coordinating the activities of the program1 7ii7 to develop training materials1 conduct training1 and perform quality reviews of the returns for which assistance has been provided under the program1 and 7iii7 for equipment purchases and vehicle-related expenses associated with remote or rural tax preparation services1 7,b7 outreach and educational activities described in subsection 7a77#b77;,c77ii71 and 7,c7 services related to financial education and capability1 asset development1 and the establishment of savings accounts in connection with tax return preparation4 7#b7 ,use of grants for overhead expenses prohibited ,no grant made under this section may be used for overhead expenses that are not directly related to any qualified return preparation program4 7c7 ,promotion and referral 7#a7 ,promotion ,the ,secretary shall promote the benefits of1 and encourage the use of1 tax preparation through qualified return preparation programs through the use of mass communications1 referrals1 and other means4 7#b7 ,internal revenue service referrals ,the ,secretary shall refer taxpayers to qualified return preparation programs receiving funding under this section4 7#c7 ,,vita grantee referral ,qualified return preparation programs receiving a grant under this section are encouraged to refer1 as appropriate1 to local or regional ,low ,income ,taxpayer ,clinics individuals who are eligible to receive services at such clinics4 7d7 ,definitions ,for purposes of this section-- 7#a7 ,qualified return preparation program ,the term qualified return preparation program means any program-- 7,a7 which provides assistance to individuals1 not less than #ij percent of whom are low-income taxpayers1 in preparing and filing ,federal income tax returns1 7,b7 which is administered by a qualified entity1 7,c7 in which all of the volunteers who assist in the preparation of ,federal income tax returns meet the training requirements prescribed by the ,secretary1 and 7,d7 which uses a quality review process which reviews #ajj percent of all returns4 7#b7 ,qualified entity 7,a7 ,in general ,the term qualified entity means any entity which-- 7i7 is an eligible organization 7as described in subparagraph 7,b771 7ii7 is in compliance with ,federal tax filing and payment requirements1 7iii7 is not debarred or suspended from ,federal contracts1 grants1 or cooperative agreements1 and 7iv7 agrees to provide documentation to substantiate any matching funds provided under the ,,vita grant program4 7,b7 ,eligible organization 7i7 ,in general ,subject to clause 7ii71 the term eligible organization means-- 7,i7 an institution of higher education which is described in section #ajb 7other than subsection 7a77#a77;,c7 thereof7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajhh71 as in effect on the date of the enactment of this section1 and which has not been disqualified from participating in a program under title ,,iv of such ,act1 7,,ii7 an organization described in section #eja7;c7 of the ,internal ,revenue ,code of #aihf and exempt from tax under section #eja7;a7 of such ,code1 7,,iii7 a local government agency1 including-- 7aa7 a county or municipal government agency1 and 7bb7 an ,indian tribe1 as defined in section #d7ac7 of the ,native ,american ,housing ,assistance and ,self-,determination ,act of #aiif 7#be ,u4,s4,c4 #dajc7ac771 including any tribally designated housing entity 7as defined in section #d7bb7 of such ,act 7#be ,u4,s4,c4 #dajc7bb7771 tribal subsidiary1 subdivision1 or other wholly owned tribal entity1 or 7,,iv7 a local1 ,state1 regional1 or national coalition 7with one lead organization which meets the eligibility requirements of subclause 7,i71 7,,ii71 or 7,,iii7 acting as the applicant organization74 7ii7 ,alternative eligible organization ,if no eligible organization described in clause 7i7 is available to assist the targeted population or community1 the term eligible organization shall include-- 7,i7 a ,state government agency1 and 7,,ii7 a ,cooperative ,extension ,service office4 7#c7 ,low-income taxpayers ,the term low-income taxpayer means a taxpayer who has income for the taxable year which does not exceed an amount equal to the completed phaseout amount under section #cb7;b7 for a married couple filing a joint return with three or more qualifying children1 as determined in a revenue procedure or other published guidance4 7#d7 ,underserved population ,the term underserved population includes populations of persons with disabilities1 persons with limited ,english proficiency1 ,native ,americans1 individuals living in rural areas1 members of the ,armed ,forces and their spouses1 and the elderly4 4 7b7 ,clerical amendment ,the table of sections for chapter #gg is amended by inserting after the item relating to section #gebf the following new item3 #gebf;,a4 ,return preparation programs for low-income taxpayers4 4 #aajgg4 ,free file program 7a7 ,the ,secretary of the ,treasury1 or the ,secretary's delegate1 shall continue to operate the ,,irs ,free ,file ,program as established by the ,internal ,revenue ,service and published in the ,federal ,register on ,november #d1 #bjjb 7#fg ,fed4 ,reg4 #fgbdg71 including any subsequent agreements and governing rules established pursuant thereto4 7b7 ,the ,,irs ,free ,file ,program shall continue to provide free commercial-type online individual income tax preparation and electronic filing services to the lowest #gj percent of taxpayers by income4 ,the number of taxpayers eligible to receive such services each year shall be calculated by the ,internal ,revenue ,service annually based on prior year aggregate taxpayer adjusted gross income data4 7c7 ,in addition to the services described in subsection 7b71 and in the same manner1 the ,,irs ,free ,file ,program shall continue to make available to all taxpayers 7without regard to income7 a basic1 online electronic fillable forms utility4 7d7 ,the ,,irs ,free ,file ,program shall continue to work cooperatively with the private sector to provide the free individual income tax preparation and the electronic filing services described in subsections 7b7 and 7c74 7e7 ,the ,,irs ,free ,file ,program shall work cooperatively with ,state government agencies to enhance and expand the use of the program to provide needed benefits to the taxpayer while reducing the cost of processing returns4 7f7 ,nothing in this section is intended to impact the continuity of services provided under ,taxpayer ,assistance ,centers1 ,tax ,counseling for the ,elderly1 and ,volunteer ,income ,tax ,assistance programs4 #aajgh4 ,attorneys' fees relating to awards to whistleblowers 7a7 ,in general ,paragraph 7#ba7 of section #fb7;a7 is amended to read as follows3 7#ba7 ,attorneys' fees relating to awards to whistleblowers 7,a7 ,in general ,any deduction allowable under this chapter for attorney fees and court costs paid by1 or on behalf of1 the taxpayer in connection with any award under-- 7i7 section #gfbc7;b71 or 7ii7 in the case of taxable years beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf1 any action brought under-- 7,i7 section #ba;,f of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghu-#f71 7,,ii7 a ,state law relating to false or fraudulent claims that meets the requirements described in section #aiji7;b7 of the ,social ,security ,act 7#db ,u4,s4,c4 #acif;h7b771 or 7,,iii7 section #bc of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #bf74 7,b7 ,may not exceed award ,subparagraph 7,a7 shall not apply to any deduction in excess of the amount includible in the taxpayer's gross income for the taxable year on account of such award4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aajgi4 ,clarification of whistleblower awards 7a7 ,definition of proceeds 7#a7 ,in general ,section #gfbc is amended by adding at the end the following new subsection3 7c7 ,proceeds ,for purposes of this section1 the term proceeds includes-- 7#a7 penalties1 interest1 additions to tax1 and additional amounts provided under the internal revenue laws1 and 7#b7 any proceeds arising from laws for which the ,internal ,revenue ,service is authorized to administer1 enforce1 or investigate1 including-- 7,a7 criminal fines and civil forfeitures1 and 7,b7 violations of reporting requirements4 4 7#b7 ,conforming amendments ,paragraphs 7#a7 and 7#b77;,a7 of section #gfbc7;b7 are each amended by striking collected proceeds 7including penalties1 interest1 additions to tax1 and additional amounts7 resulting from the action and inserting proceeds collected as a result of the action4 7b7 ,amount of proceeds determined without regard to availability ,paragraphs 7#a7 and 7#b77;,a7 of section #gfbc7;b7 are each amended by inserting 7determined without regard to whether such proceeds are available to the ,secretary7 after in response to such action4 7c7 ,disputed amount threshold ,section #gfbc7;b77#e77;,b7 is amended by striking tax1 penalties1 interest1 additions to tax1 and additional amounts and inserting proceeds4 7d7 ,effective date ,the amendments made by this section shall apply to information provided before1 on1 or after the date of the enactment of this ,act with respect to which a final determination for an award has not been made before such date of enactment4 ,,viii ,individual mandate #aajha4 ,elimination of shared responsibility payment for individuals failing to maintain minimum essential coverage 7a7 ,in general ,section #ejjj;,a7c7 is amended-- 7#a7 in paragraph 7#b77;,b77iii71 by striking #b4e percent and inserting ,zero percent1 and 7#b7 in paragraph 7#c7-- 7,a7 by striking #fie in subparagraph 7,a7 and inserting #j1 and 7,b7 by striking subparagraph 7,d74 7b7 ,effective date ,the amendment made by this section shall apply to months beginning after ,december #ca1 #bjah4 ,b ,alternative ,minimum ,tax #abjja4 ,repeal of tax for corporations 7a7 ,in general ,section #ee7;a7 is amended by striking ,there and inserting ,in the case of a taxpayer other than a corporation1 there4 7b7 ,conforming amendments 7#a7 ,section #ch7;c77#f7 is amended by adding at the end the following new subparagraph3 7,e7 ,corporations ,in the case of a corporation1 this subsection shall be applied by treating the corporation as having a tentative minimum tax of zero4 4 7#b7 7,a7 ,section #ee7;b77#a7 is amended to read as follows3 7#a7 ,amount of tentative tax 7,a7 ,in general ,the tentative minimum tax for the taxable year is the sum of-- 7i7 #bf percent of so much of the taxable excess as does not exceed #age1jjj1 plus 7ii7 #bh percent of so much of the taxable excess as exceeds #age1jjj4 ,the amount determined under the preceding sentence shall be reduced by the alternative minimum tax foreign tax credit for the taxable year4 7,b7 ,taxable excess ,for purposes of this subsection1 the term taxable excess means so much of the alternative minimum taxable income for the taxable year as exceeds the exemption amount4 7,c7 ,married individual filing separate return ,in the case of a married individual filing a separate return1 subparagraph 7,a7 shall be applied by substituting #ej percent of the dollar amount otherwise applicable under clause 7i7 and cause 7ii7 thereof4 ,for purposes of the preceding sentence1 marital status shall be determined under section #ggjc4 4 7,b7 ,section #ei7;a7 is amended-- 7i7 by striking subparagraph 7,a77i7 or 7,b77i7 of section #ee7;b77#a7 7whichever applies7 in lieu of the highest rate of tax specified in section #a or #aa 7whichever applies7 in paragraph 7#a77;,c7 and inserting section #ee7;b77#a7 in lieu of the highest rate of tax specified in section #a1 and 7ii7 in paragraph 7#b71 by striking means and all that follows and inserting means the amount determined under the first sentence of section #ee7;b77#a744 7,c7 ,section #hig7;a77#b77;,a7 is amended by striking section #ee7;b77#a77;,a7 and inserting section #ee7;b77#a74 7,d7 ,section #iaa7;f7 is amended-- 7i7 in paragraph 7#a77;,b7-- 7,i7 by striking section #ee7;b77#a77;,a77ii7 and inserting section #ee7;b77#a77;,b71 and 7,,ii7 by striking section #ee7;b77#a77;,a77i7 and inserting section #ee7;b77#a77;,a71 and 7ii7 in paragraph 7#b77;,b71 by striking section #ee7;b77#a77;,a77ii7 each place it appears and inserting section #ee7;b77#a77;,b74 7#c7 ,section #ee7;c77#a7 is amended by striking 1 the section #icf credit allowable under section #bg7;b71 and the ,puerto ,rico economic activity credit under section #cj;,a4 7#d7 ,section #ee7;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 7,b7 in paragraph 7#b7 7as so redesignated71 by inserting and at the end of subparagraph 7,b71 by striking 1 and at the end of subparagraph 7,c7 and inserting a period1 and by striking subparagraph 7,d71 and 7,c7 in paragraph 7#c7 7as so redesignated7-- 7i7 by striking 7b77#a77;,a77i7 in subparagraph 7,b77i7 and inserting 7b77#a77;,a71 and 7ii7 by striking paragraph 7#c7 in subparagraph 7,b77iii7 and inserting paragraph 7#b74 7#e7 ,section #ee is amended by striking subsection 7e74 7#f7 7,a7 ,section #ef is amended by striking subsections 7c7 and 7g74 7,b7 ,section #hdg is amended by striking the last sentence of paragraph 7#i74 7,c7 ,section #hdh is amended by striking subsection 7i74 7#g7 ,section #eh7;a7 is amended by striking paragraph 7#c7 and redesignating paragraph 7#d7 as paragraph 7#c74 7#h7 ,section #ei is amended by striking subsections 7b7 and 7f74 7#i7 ,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#aj7 ,section #ab is amended by striking paragraph 7#g74 7#aa7 ,section #afh7k7 is amended by striking paragraph 7#d74 7#ab7 ,section #hhb7;a77#a7 is amended by striking 1 #ee14 7#ac7 ,section #ifb7;a77#a7 is amended by striking sections #aa and #ee and inserting section #aa4 7#ad7 ,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#ae7 ,section #fdbe7;c77#a77;,a7 is amended to read as follows3 7,a7 the tax imposed by section #aa or #abja7;a71 or subchapter ,l of chapter #a1 whichever is applicable1 over 4 7#af7 ,section #ffee7;e77#b7 is amended by striking and alternative minimum taxable income each place it appears in subparagraphs 7,a7 and 7,b77i74 7#ag7 ,section #ffee7;g77#a77;,a7 is amended by inserting plus at the end of clause 7i71 by striking clause 7ii71 and by redesignating clause 7iii7 as clause 7ii74 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #abjjb4 ,suspension of tax on individuals 7a7 ,in general ,section #ee7;a7 is amended by adding at the end the following new flush sentence3 ,no tax shall be imposed by this section for any taxable year beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbf1 and the tentative minimum tax of any taxpayer for any such taxable year shall be zero for purposes of this title4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #abjjc4 ,credit for prior year minimum tax liability 7a7 ,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 #bjah1 #bjai1 #bjbj1 or #bjba1 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 #bjba7 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 7b7 ,treatment of references ,section #ec7;d7 is amended by adding at the end the following new paragraph3 7#c7 ,,amt term references ,in the case of a corporation1 any references in this subsection to section #ee1 #ef1 or #eg shall be treated as a reference to such section as in effect before the amendments made by ,tax ,cuts and ,jobs ,act4 4 7c7 ,conforming amendment ,section #acgd7;b77#c77;,b7 is amended by striking the last sentence thereof4 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 ,conforming amendment ,the amendment made by subsection 7c7 shall apply to taxable years beginning after ,december #ca1 #bjba4 ,c ,business-related provisions ,i ,corporate provisions ,a #bj-percent tax rate #acjja4 #bj-percent corporate tax rate 7a7 ,in general ,subsection 7b7 of section #aa is amended to read as follows3 7b7 ,amount of tax ,the amount of the tax imposed by subsection 7a7 shall be #bj percent of taxable income4 4 7b7 ,conforming amendments 7#a7 ,the following sections are each amended by striking section #aa7;b77#a7 and inserting section #aa7;b73 7,a7 ,section #bhj;,c7c77#c77;,b77ii77,,ii74 7,b7 ,paragraphs 7#b77;,b7 and 7#f77;,a77ii7 of section #hfj;,e7e74 7,c7 ,section #ghgd7;e77#a77;,b7 7#b7 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 paragraphs 7#d7 and 7#f71 and by redesignating paragraph 7#e7 as paragraph 7#d74 7,c7 ,section #dec;,a7c77#c7 is amended by striking or #abja 7whichever is appropriate74 7,d7 ,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,e7 ,sections #eid7;a7 is amended by striking taxes imposed by section #aa or #abja7;a7 and inserting tax imposed by section #aa4 7,f7 ,section #fia7;c77#d7 is amended by striking #abja14 7,g7 ,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,h7 ,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,i7 ,sections #hcb7;c77#e7 and #hcd7;b77#a77;,d7 are each amended by striking sec4 #abja and following14 7,j7 ,section #heb7;b77#c77;,a7 is amended by striking section #abja7;a7 and inserting section #aa7;b74 7,k7 ,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,l7 ,section #hhb7;a77#a71 as amended by section #abjja1 is amended by striking or #abja7;a74 7,m7 ,section #ijd7;b7 is amended-- 7i7 by striking or #abja7;a7 in paragraph 7#b77;,c71 7ii7 by striking paragraph 7#c77;,d7 and inserting the following3 7,d7 ,capital gain rate differential ,there is a capital gain rate differential for any year if subsection 7h7 of section #a applies to such taxable year4 1 and 7iii7 by striking paragraph 7#c77;,e7 and inserting the following3 7,e7 ,rate differential portion ,the rate differential portion of foreign source net capital gain1 net capital gain1 or the excess of net capital gain from sources within the ,united ,states over net capital gain1 as the case may be1 is the same proportion of such amount as-- 7i7 the excess of-- 7,i7 the highest rate of tax set forth in subsection 7a71 7b71 7c71 7d71 or 7e7 of section #a 7whichever applies71 over 7,,ii7 the alternative rate of tax determined under section #a7;h71 bears to 7ii7 that rate referred to in subclause 7,i74 4 7,n7 ,section #acgd7;b7 is amended by striking paragraph 7#d74 7,o7 ,section #acha7;b7 is amended by striking taxes imposed by section #aa or #abja and inserting tax imposed by section #aa4 7,p7 ,sections #fdbe7;c77#a77;,a71 as amended by section #abjja1 and #ffee7;g77#a77;,a77i7 are each amended by striking or #abja7;a714 7,q7 ,section #geah7;g77#f77;,a7 is amended by striking or #abja7;a74 7#c7 7,a7 ,section #adde7;e77#a7 is amended-- 7i7 by striking #ce percent and inserting the highest rate of tax in effect for the taxable year under section #aa7;b71 and 7ii7 by striking of the gain and inserting multiplied by the gain4 7,b7 ,section #adde7;e77#b7 is amended by striking #ce percent of the amount and inserting the highest rate of tax in effect for the taxable year under section #aa7;b7 multiplied by the amount4 7,c7 ,section #adde7;e77#f7 is amended-- 7i7 by striking #ce percent and inserting the highest rate of tax in effect for the taxable year under section #aa7;b71 and 7ii7 by striking of the amount and inserting multiplied by the amount4 7,d7 ,section #addf7;b77#b77;,b7 is amended by striking section #aa7;b77#a7 and inserting section #aa7;b74 7#d7 ,section #heb7;b77#a7 is amended by striking the last sentence4 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 #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 section #abjja1 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 ,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 #bjah4 7#b7 ,withholding ,the amendments made by subsection 7b77#c7 shall apply to distributions made after ,december #ca1 #bjah4 7#c7 ,certain transfers ,the amendments made by subsection 7b77#f7 shall apply to transfers made after ,december #ca1 #bjah4 7d7 ,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 #aihf7 as determined under the ,internal ,revenue ,code of #aihf as in effect on the day before the date of the enactment of this ,act1 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 #acjjb4 ,reduction in dividend received deductions to reflect lower corporate income tax rates 7a7 ,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-- 7,a7 by striking #hj percent and inserting #fe percent1 and 7,b7 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 7b7 ,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 7c7 ,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 7d7 ,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 7e7 ,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-- 7,a7 by striking #ajj_/hjth and inserting #ajj_/feth1 and 7,b7 by striking #ajj_/gjth and inserting #ajj_/ejth4 7f7 ,effective date 7#a7 ,in general ,the amendments made by this section 7other than subsection 7c7 thereof7 shall apply to dividends received by a corporation after ,december #ca1 #bjah1 in taxable years ending after such date4 7#b7 ,limitation ,the amendments made by section #ajb7;c7 shall apply to taxable years beginning after ,december #ca1 #bjah4 ,b ,dividends paid deduction for domestic corporations #acjaa4 ,dividends paid deduction 7a7 ,general rule ,part ,,viii of subchapter ,b of chapter #a is amended by inserting after section #bda the following3 ,b ,dividends paid deduction ,sec4 #bdb4 ,dividends paid deduction4 #bdb4 ,dividends paid deduction 7a7 ,allowance of deduction ,in the case of an eligible corporation1 there shall be allowed as a deduction an amount equal to zero percent of the aggregate amount of applicable dividends paid by the corporation during the taxable year4 7b7 ,applicable ,dividend ,for purposes of this section-- 7#a7 ,in general ,the term applicable dividend means1 with respect to an eligible corporation1 any distribution by the eligible corporation during a taxable year which is-- 7,a7 treated as a dividend for purposes of this chapter1 and 7,b7 paid out of its applicable earnings and profits4 7#b7 ,ordering rule for dividend payments ,for purposes of paragraph 7#a77;,b71 dividends shall be treated as paid-- 7,a7 first1 out of exempt earnings and profits1 7,b7 second1 out of applicable earnings and profits1 and 7,c7 finally1 out of earnings and profits not described in subparagraph 7,a7 or 7,b74 7#c7 ,coordination with other deductions ,such term shall not include-- 7,a7 any amount allowed as a deduction under section #eia 7relating to deduction for dividends paid by mutual savings banks1 etc471 and 7,b7 any dividend described in paragraph 7#b7 of section #djd7k7 7relating to deduction for dividends paid on certain employer securities74 7#d7 ,election to treat certain distributions paid after close of year as paid during year ,for purposes of this title1 an eligible corporation may elect on its return of tax for any taxable year to treat any distribution made on or before the #aeth day of the #dth month following the close of the taxable year as having been made immediately before the close of the taxable year4 ,the preceding sentence shall not apply for purposes of determining the time the distribution was received by the shareholder to whom the distribution was made4 7#e7 ,applicable earnings and profits 7,a7 ,in general ,the term applicable earnings and profits means1 with respect to any corporation for any taxable year1 its earnings and profits for the taxable year and its earnings and profits accumulated in prior taxable years beginning after ,december #ca1 #bjah4 ,for purposes of the preceding sentence1 earnings and profits for the taxable year shall be determined without regard to the deduction under this section for the taxable year4 7,b7 ,exempt earnings and profits not treated as applicable earnings and profits ,the applicable earnings and profits of a corporation shall not include any exempt earnings and profits 7as defined in paragraph 7#f774 7,c7 ,look-thru in the case of dividends received from controlled foreign corporation or #aj_/ej corporation ,if a corporation which is a ,united ,states shareholder in a controlled foreign corporation1 or is a shareholder in a foreign corporation with respect to which the shareholder meets the stock ownership requirements of section #ijb7;a71 receives a dividend 7other than a dividend to which subparagraph 7,b7 applies7 from such controlled foreign corporation or such foreign corporation1 the earnings and profits from such dividend shall not be treated as applicable earnings and profits of the corporation receiving such dividend to the extent of any portion of the dividend not properly allocable 7as determined under section #caf1 as modified by section #iei7;c7 in the case of such controlled foreign corporation7 to applicable earnings and profits of such controlled foreign corporation or such foreign corporation4 7#f7 ,exempt earnings and profits 7,a7 ,in general ,the term exempt earnings and profits means1 with respect to any corporation for any taxable year1 its earnings and profits for the taxable year and its earnings and profits accumulated in prior taxable years beginning after ,december #ca1 #bjah1 which are properly allocable to exempt amounts received or accrued by the corporation4 7,b7 ,exempt amounts ,the term exempt amounts means1 with respect to any corporation-- 7i7 any dividend to the extent of the deduction allowable to the corporation under section #bdc1 #bde1 or #bde;,a with respect to the dividend1 7ii7 any foreign-derived intangible income 7as defined in section #bej7;b77 or global intangible low-taxed income 7as defined in section #iea;,a7b77 to the extent of the deduction allowable to the corporation under section #bej with respect to any such income1 7iii7 any increase in subpart ,f income by reason of section #ife to the extent of the deduction allowable to the corporation under section #ife7;c77#a7 with respect to any such income1 and 7iv7 any other amount to the extent such amount is exempt from taxation under this title4 7#g7 ,proper allocation of dividends to earnings and profits 7,a7 ,in general ,the ,secretary shall prescribe rules for the proper allocation of dividends to earnings and profits for purposes of applying this subsection4 7,b7 ,look through rules ,for purposes of paragraph 7#d77;,c71 such rules shall include rules requiring in appropriate cases the look through to earnings and profits of members of any affiliated group including a controlled foreign corporation or foreign corporation described in such paragraph where the earnings and profits of such controlled foreign corporation or such foreign corporation are attributable to distributions received from other members of the group4 7c7 ,eligible corporation ,for purposes of this section1 the term eligible corporation means any domestic corporation other than-- 7#a7 a regulated investment company1 7#b7 a real estate investment trust1 7#c7 an ,s corporation1 7#d7 a corporation which is exempt from tax under section #eja or #eba1 7#e7 an organization taxable under subchapter ,t of this chapter 7relating to cooperative organizations71 7#f7 a cooperative governed by the rules applicable to cooperatives as in effect before the enactment of subchapter ,t1 or 7#g7 a ,,disc or former ,,disc4 7d7 ,reporting requirement 7#a7 ,in general ,each eligible corporation which makes payments of dividends during the reporting period for any taxable year shall make a return1 according to the forms and regulations prescribed by the ,secretary1 setting forth-- 7,a7 the aggregate amount of such dividends1 7,b7 the aggregate amount of such dividends with respect to which the corporation is claiming a deduction under this section for the taxable year1 7,c7 the aggregate amount of such dividends which the corporation paid during the period beginning on the #ast day of the reporting taxable year and ending on the #aeth day of the #dth month of such taxable year which the corporation elected under subsection 7b77#d7 to treat as paid in the preceding taxable year1 7,d7 the aggregate amount of such dividends which the corporation paid during the period beginning on the #ast day of the taxable year following the reporting taxable year and ending on the #aeth day of the #dth month of such following taxable year which the corporation elected under subsection 7b77#d7 to treat as paid in the reporting taxable year1 and 7,e7 such other information with respect to such dividends as the ,secretary shall require for the administration of this section4 7#b7 ,reporting period2 due date ,for purposes of this subsection-- 7,a7 ,reporting period ,the term reporting period means with1 respect to any taxable year1 the period beginning on the #ast day of the taxable year and ending on the #aeth day of the #dth month following the close of the taxable year4 7,b7 ,due date ,any return under paragraph 7#a7 with respect to any taxable year shall be included with the return of income tax for such taxable year4 4 7b7 ,penalty for failure to report ,section #ffeb1 as amended by subtitle ,e of this ,act1 is amended by adding at the end the following new subsection3 7r7 ,failure to file returns by corporations eligible for dividends paid deduction 7#a7 ,penalty for failure to file return ,in the case of a failure to make a return required under section #bdb7;d7 containing the information required by such section by the due date for the return1 the eligible corporation shall pay 7on notice and demand by the ,secretary and in the same manner as tax7 a penalty of #a1jjj per day for each day such failure continues unless it is shown that such failure is due to reasonable cause4 ,the maximum amount of the penalty under this paragraph with respect to any failure for a taxable year shall not exceed #bej1jjj4 7#b7 ,eligible corporation ,for purposes of this subsection1 the term eligible corporation has the meaning given such term by section #bdb7;c74 4 7c7 ,dividends paid deduction allowable only in taxable year of dividend payment 7#a7 ,in general ,subsection 7d7 of section #agb1 as amended by section #aajaa1 is amended by adding at the end the following new paragraph3 7#i7 ,dividends paid deduction ,the deduction under section #bdb shall not be allowed4 4 7#b7 ,treatment of carrybacks and carryovers ,subparagraph 7,a7 of section #agb7;b77#b71 as amended by section #accjb1 is amended by striking and 7#e7 and inserting 7#e71 and 7#h74 7d7 ,other conforming amendments ,part ,,viii of subchapter ,b of chapter #a is amended-- 7#a7 by striking the table of sections and inserting the following3 ,,viii ,special deductions for corporations ,subpart ,a4 ,allowance of special deductions4,subpart ,b4 ,dividends paid deduction4,subpart ,c4 ,dividends received deductions4,subpart ,d4 ,other deductions4 ,a ,allowance of special deductions ,sec4 #bda4 ,allowance of special deductions4 1 7#b7 by inserting the following before section #bdc3 ,c ,dividends received deductions ,sec4 #bdc4 ,dividends received by corporations4,sec4 #bde4 ,dividends received from certain foreign corporations4 ,sec4 #bde;,a4 ,deduction for foreign-source portion of dividends received by domestic corporations from specified #aj-percent owned foreign corporations4,sec4 #bdf4 ,rules applying to deductions for dividends received4,sec4 #bdf;,a4 ,dividends received deduction reduced where portfolio stock is debt financed4 1 and 7#c7 by inserting the following before section #bdh3 ,d ,other deductions ,sec4 #bdh4 ,organizational expenditures4,sec4 #bdi4 ,limitation of deduction of bond premium on repurchase4,sec4 #bej4 ,foreign-derived intangible income and global intangible low-taxed income4 4 7e7 ,effective date ,the amendments made by this section shall apply to dividends paid in taxable years of the payor beginning after ,december #ca1 #bjah4 #acjab4 ,tax equivalent to dividends paid deduction for certain foreign corporations 7a7 ,dividends paid deduction ,paragraph 7#a7 of section #hhb7;c7 is amended by adding at the end the following new subparagraph3 7,c7 ,special rule for dividends paid deduction ,for purposes of subparagraph 7,a7-- 7i7 the deduction under section #bdb shall not be allowed for any taxable year1 and 7ii7 there shall be allowed1 in lieu of such deduction1 a deduction in an amount equal to zero percent of the dividend equivalent amount 7as defined in section #hhd7;b77 of the foreign corporation for the taxable year4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjah4 #acjac4 ,allocation of dividend expense among members of worldwide affiliated groups 7a7 ,in general ,paragraph 7#f7 of section #hfd7;e7 is amended to read as follows3 7#f7 ,allocation and apportionment of other expenses 7,a7 ,in general ,except as provided in subparagraph 7,b71 expenses other than interest which are not directly allocable or apportioned to any specific income producing activity shall be allocated and apportioned as if all members of the affiliated group were a single corporation4 7,b7 ,dividend expense ,the dividend expense of any domestic corporation which is a member of an affiliated group shall be allocated and apportioned to income from sources without the ,united ,states in the same proportion which-- 7i7 the aggregate amount of income treated as from sources without the ,united ,states by all domestic corporations which are members of such group 7determined without regard to such dividend expense71 bears to 7ii7 the aggregate income of all such domestic corporations from sources within and without the ,united ,states 7as so determined74 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjah4 ,,ii ,small business reforms #acaja4 ,modifications of rules for expensing depreciable business assets 7a7 ,increase in limitation 7#a7 ,dollar limitation ,section #agi7;b77#a7 is amended by striking #ejj1jjj and inserting #a1jjj1jjj4 7#b7 ,reduction in limitation ,section #agi7;b77#b7 is amended by striking #b1jjj1jjj and inserting #b1ejj1jjj4 7#c7 ,inflation adjustments 7,a7 ,in general ,subparagraph 7,a7 of section #agi7;b77#f7 is amended-- 7i7 by striking #bjae and inserting #bjah1 and 7ii7 in clause 7ii71 by striking calendar year #bjad and inserting calendar year #bjag4 7,b7 ,sport utility vehicles ,section #agi7;b77#f7 is amended-- 7i7 in subparagraph 7,a71 by striking paragraphs 7#a7 and 7#b7 and inserting paragraphs 7#a71 7#b71 and 7#e77;,a71 and 7ii7 in subparagraph 7,b71 by inserting 7#ajj in the case of any increase in the amount under paragraph 7#e77;,a77 after #aj1jjj4 7b7 ,section #agi property to include qualified real property 7#a7 ,in general ,subparagraph 7,b7 of section #agi7;d77#a7 is amended to read as follows3 7,b7 which is-- 7i7 section #abde property 7as defined in section #abde7;a77#c771 or 7ii7 qualified real property 7as defined in subsection 7f771 and 4 7#b7 ,qualified real property defined ,subsection 7f7 of section #agi is amended to read as follows3 7f7 ,qualified real property ,for purposes of this subsection1 the term qualified real property means-- 7#a7 any qualified improvement property described in section #afh7;e77#f71 and 7#b7 any of the following improvements to nonresidential real property placed in service after the date such property was first placed in service3 7,a7 ,roofs4 7,b7 ,heating1 ventilation1 and air-conditioning property4 7,c7 ,fire protection and alarm systems4 7,d7 ,security systems4 4 7c7 ,repeal of exclusion for certain property ,the last sentence of section #agi7;d77#a7 is amended by inserting 7other than paragraph 7#b7 thereof7 after section #ej7;b74 7d7 ,effective date ,the amendments made by this section shall apply to property placed in service in taxable years beginning after ,december #ca1 #bjag4 #acajb4 ,modifications of gross receipts test for use of cash method of accounting by corporations and partnerships 7a7 ,modifications of gross receipts test 7#a7 ,in general ,so much of section #ddh7;c7 as precedes paragraph 7#b7 is amended to read as follows3 7c7 ,gross receipts test 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 the applicable dollar limit4 4 7#b7 ,applicable dollar limit ,subsection 7c7 of section #ddh is amended by adding at the end the following new paragraph3 7#d7 ,applicable dollar limit 7,a7 ,in general ,the applicable dollar limit is #ae1jjj1jjj4 7,b7 ,adjustment for inflation ,in the case of any taxable year beginning after ,december #ca1 #bjah1 the #ae1jjj1jjj amount under subparagraph 7,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;f77#c7 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 #a1jjj1 such amount shall be rounded to the next lowest multiple of #a1jjj4 4 7#c7 ,change in method of accounting ,paragraph 7#g7 of section #ddh7;d7 is amended-- 7,a7 by striking ,in the case of and all that follows up to subparagraph 7,a7 and inserting3 ,if a taxpayer changes its method of accounting because the taxpayer is prohibited from using the cash receipts and disbursement method of accounting by reason of subsection 7a7 or is no longer prohibited from using such method by reason of such subsection--1 and 7,b7 by inserting and at the end of subparagraph 7,a71 by striking 1 and at the end of subparagraph 7,b7 and inserting a period1 and by striking subparagraph 7,c74 7#d7 ,conforming amendment ,paragraph 7#c7 of section #ddh7;b7 is amended to read as follows3 7#c7 ,entities satisfying 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 meets the gross receipts test of subsection 7c7 for the taxable year4 4 7b7 ,application of modifications to farming corporations 7#a7 ,in general ,paragraph 7#a7 of section #ddg7;d7 is amended to read as follows3 7#a7 ,in general ,a corporation meets the requirements of this subsection for any taxable year with respect to its gross receipts if the corporation meets the gross receipts test of section #ddh7;c7 for the taxable year4 4 7#b7 ,family corporations ,paragraph 7#b7 of section #ddg7;d7 is amended-- 7,a7 by striking subparagraph 7,a7 and inserting the following3 7,a7 ,in general ,in the case of a family corporation1 in applying section #ddh7;c7 for purposes of paragraph 7#a7-- 7i7 paragraph 7#a7 of section #ddh7;c7 shall be applied by substituting the applicable family corporation limit for the applicable dollar limit1 and 7ii7 the rules of subparagraph 7,b7 shall apply in computing gross receipts4 1 7,b7 ,clause 7i7 of section #ddg7;d77#b77;,b7 is amended by striking the last sentence of paragraph 7#a7 and inserting paragraph 7#b7 of section #ddh7;c71 and 7,c7 by adding at the end the following new subparagraph3 7,d7 ,applicable family corporation limit 7i7 ,in general ,the applicable family corporation limit is #be1jjj1jjj4 7ii7 ,adjustment for inflation ,in the case of any taxable year beginning after ,december #ca1 #bjah1 the #be1jjj1jjj amount under clause 7i7 shall be increased by an amount equal to-- 7,i7 such dollar amount1 multiplied by 7,,ii7 the cost-of-living adjustment determined under section #a7;f77#c7 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 #a1jjj1 such amount shall be rounded to the next lowest multiple of #a1jjj4 4 7#c7 ,exception for certain corporations ,subsection 7c7 of section #ddg is amended by inserting for any taxable year after not being a corporation4 7#d7 ,change in method of accounting ,section #ddg7;f7 is amended-- 7,a7 by striking ,in the case of and all that follows up to paragraph 7#a7 and inserting the following3 ,if a taxpayer changes its method of accounting because the taxpayer is required to use an accrual method of accounting by reason of subsection 7a7 or is no longer required to use such method by reason of such subsection--1 and 7,b7 by striking paragraph 7#b7 and inserting the following3 7#b7 such change shall be treated as initiated by the taxpayer1 and 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acajc4 ,clarification of inventory accounting rules for small businesses 7a7 ,clarification of inventory rules 7#a7 ,in general ,section #dga is amended by redesignating subsection 7c7 as subsection 7d7 and by inserting after subsection 7b7 the following new subsection3 7c7 ,small business taxpayers not required to use inventories 7#a7 ,in general ,a qualified taxpayer shall not be required to use inventories under this section for a taxable year4 7#b7 ,treatment of taxpayers not using inventories ,a qualified taxpayer who is not required under this subsection to use inventories with respect to any property for a taxable year beginning after ,december #ca1 #bjag1 may treat such property-- 7,a7 as a non-incidental material or supply1 or 7,b7 in a manner which conforms to the taxpayer's method for accounting for such property in-- 7i7 an applicable financial statement 7as defined in section #dea7;b77#a771 or 7ii7 in the case of a taxpayer that does not have an applicable financial statement1 their books and records used for purposes of determining tax imposed by this title4 7#c7 ,qualified taxpayer ,for purposes of this subsection1 the term qualified taxpayer means1 with respect to any taxable year1 a taxpayer who meets the gross receipts test of section #ddh7;c7 for the taxable year 7or1 in the case of a sole proprietorship1 who would meet such test if such proprietorship were a corporation74 ,such term shall not include a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section #ddh7;a77#c74 7#d7 ,coordination with section #dha ,if a taxpayer changes its method of accounting because the taxpayer is not required to use inventories by reason of paragraph 7#a7 or is required to use inventories because such paragraph no longer applies to the taxpayer-- 7,a7 such change shall be treated as initiated by the taxpayer1 and 7,b7 such change shall be treated as made with the consent of the ,secretary4 4 7#b7 ,conforming amendment ,subsection 7c7 of section #bfc;,a is amended by adding at the end the following new paragraph3 7#h7 ,exclusion from inventory rules ,nothing in this section shall require the use of inventories for any taxable year by a qualified taxpayer 7within the meaning of section #dga7;c77#c77 who is not required to use inventories under section #dga for such taxable year4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acajd4 ,modification of rules for uniform capitalization of certain expenses 7a7 ,in general ,section #bfc;,a7b7 is amended by striking all that follows paragraph 7#a7 and inserting the following new paragraphs3 7#b7 ,property acquired for resale ,real or personal property described in section #abba7;a77#a7 which is acquired by the taxpayer for resale4 7#c7 ,exception for small businesses ,this section shall not apply to any taxpayer who meets the gross receipts test under section #ddh7;c7 for the taxable year 7or1 in the case of a sole proprietorship1 who would meet such test if such proprietorship were a corporation71 other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section #ddh7;a77#c74 7#d7 ,films1 sound recordings1 books1 etc ,for purposes of this subsection1 the term tangible personal property shall include a film1 sound recording1 video tape1 book1 or similar property4 7#e7 ,coordination with section #dha ,if a taxpayer changes its method of accounting because this section does not apply to the taxpayer by reason of the exception under paragraph 7#c7 or this section applies to the taxpayer because such exception no longer applies to the taxpayer-- 7,a7 such change shall be treated as initiated by the taxpayer1 and 7,b7 such change shall be treated as 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 #acaje4 ,increase in gross receipts test for construction contract exception to percentage of completion method 7a7 ,increase 7#a7 ,in general ,section #dfj7;e77#a77;,b7 is amended-- 7,a7 in the matter preceding clause 7i71 by inserting 7other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section #ddh7;a77#c77 after taxpayer1 and 7,b7 by striking clause 7ii7 and inserting the following3 7ii7 who meets the gross receipts test of section #ddh7;c7 for the taxable year in which such contract is entered into 7or1 in the case of a sole proprietorship1 who would meet such test if such proprietorship were a corporation74 4 7#b7 ,conforming amendments 7,a7 ,section #dfj7;e7 is amended by striking paragraphs 7#b7 and 7#c7 and by redesignating paragraphs 7#d7 through 7#f7 as paragraphs 7#b7 through 7#d71 respectively4 7,b7 ,the last sentence of section #ef7;a77#c7 is amended by striking section #dfj7;e77#f7 and inserting section #dfj7;e77#d74 7b7 ,coordination with section #dha ,section #dfj7;e71 as amended by subsection 7a71 is amended by adding at the end the following3 7#e7 ,coordination with section #dha ,if a taxpayer changes its method of accounting because subsections 7a71 7b71 7c77#a71 and 7c77#b7 do not apply by reason of the exception under paragraph 7#a77;,b7 or such subsections apply to the taxpayer because such exception no longer applies to the taxpayer-- 7,a7 such change shall be treated as initiated by the taxpayer1 7,b7 such change shall be treated as made with the consent of the ,secretary1 and 7,c7 such change shall be permitted only on a cut-off basis for all similarly classified contracts entered into on or after the year of change and no adjustments under section #dha7;a7 shall be made4 4 7c7 ,effective date ,the amendment made by this section shall apply to contracts entered into after ,december #ca1 #bjag1 in taxable years ending after such date4 ,,iii ,cost recovery and accounting methods ,a ,cost recovery #acbja4 ,temporary #ajj-percent expensing for certain business assets 7a7 ,in general 7#a7 #ajj percent expensing ,section #afh7k7 is amended-- 7,a7 in paragraph 7#a77;,a71 by striking #ej percent and inserting #ajj percent1 and 7,b7 in paragraph 7#e77;,a77i71 by striking #ej percent and inserting #ajj percent4 7#b7 ,extension through #bjbb ,section #afh7k7 is amended-- 7,a7 in the heading1 by striking ,december #ca1 #bjjg1 and before ,january #a1 #bjbj and inserting ,september #bg1 #bjag1 and before ,january #a1 #bjbc1 7,b7 in paragraph 7#b7-- 7i7 in subparagraph 7,a77iii71 clauses 7i77,,iii7 and 7ii7 of subparagraph 7,b71 and subparagraph 7,e77i71 by striking ,january #a1 #bjbj each place it appears and inserting ,january #a1 #bjbc1 and 7ii7 in subparagraph 7,b7-- 7,i7 in clause 7i77,,ii71 by striking ,january #a1 #bjba and inserting ,january #a1 #bjbd1 and 7,,ii7 in the heading of clause 7ii71 by striking pre-,january #a1 #bjbj and inserting pre-,january #a1 #bjbc1 and 7,c7 in paragraph 7#e77;,a71 by striking ,january #a1 #bjbj and inserting ,january #a1 #bjbc4 7#c7 ,exception for public utilities ,paragraph 7#f7 of section #afh7k7 is amended to read as follows3 7#f7 ,exception for certain public utility property ,the term qualified property shall not include any property which is primarily used in a trade or business described in clause 7iv7 of section #afc7;j77#g77;,a74 4 7#d7 ,special rule ,section #afh7k7 is amended by adding at the end the following new paragraph3 7#h7 ,special rule for property placed in service during certain periods 7,a7 ,in general ,in the case of qualified property placed in service by the taxpayer during the first taxable year ending after ,september #bg1 #bjag1 if the taxpayer elects to have this paragraph apply for such taxable year1 paragraphs 7#a77;,a7 and 7#e77;,a77i7 shall be applied by substituting #8#ej percent' for #8#ajj percent'4 7,b7 ,form of election ,any election under this paragraph shall be made at such time and in such form and manner as the ,secretary may prescribe4 4 7#e7 ,coordination with section #bhj;,f ,section #afh7k77#b77;,f7 is amended by striking clause 7iii74 7#f7 ,qualified film and television and live theatrical productions 7,a7 ,in general ,clause 7i7 of section #afh7k77#b77;,a71 as amended by section #acbjd1 is amended-- 7i7 in subclause 7,,ii71 by striking or1 7ii7 in subclause 7,,iii71 by adding or after the comma1 and 7iii7 by adding at the end the following3 7,,iv7 which is a qualified film or television production 7as defined in subsection 7d7 of section #aha7 for which a deduction would have been allowable under section #aha without regard to subsections 7a77#b7 and 7g7 of such section or this subsection1 or 7,v7 which is a qualified live theatrical production 7as defined in subsection 7e7 of section #aha7 for which a deduction would have been allowable under section #aha without regard to subsections 7a77#b7 and 7g7 of such section or this subsection1 4 7,b7 ,production placed in service ,paragraph 7#b7 of section #afh7k7 is amended by adding at the end the following3 7,h7 ,production placed in service ,for purposes of subparagraph 7,a7-- 7i7 a qualified film or television production shall be considered to be placed in service at the time of initial release or broadcast1 and 7ii7 a qualified live theatrical production shall be considered to be placed in service at the time of the initial live staged performance4 4 7#g7 ,conforming amendments 7,a7 ,paragraph 7#e7 of section #afh7k7 is amended by striking subparagraph 7,f74 7,b7 ,clause 7ii7 of section #dfj7;c77#f77;,b7 is amended by striking ,january #a1 #bjbj 7,january #a1 #bjba and inserting ,january #a1 #bjbc 7,january #a1 #bjbd4 7b7 ,effective dates 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by subsection 7a7 shall apply to property placed in service after ,september #bg1 #bjag1 in taxable years ending after such date4 7#b7 ,certain plants ,the amendments made by paragraphs 7#a77;,b7 and 7#b77;,c7 of subsection 7a7 shall apply to specified plants planted or grafted after ,september #bg1 #bjag1 in taxable years ending after such date4 #acbjb4 ,modifications to depreciation limitations on luxury automobiles and personal use property 7a7 ,luxury automobiles 7#a7 ,in general #bhj;,f7a77#a77;,a7 is amended-- 7,a7 in clause 7i71 by striking #b1efj and inserting #aj1jjj1 7,b7 in clause 7ii71 by striking #d1ajj and inserting #af1jjj1 7,c7 in clause 7iii71 by striking #b1dej and inserting #i1fjj1 and 7,d7 in clause 7iv71 by striking #a1dge and inserting #e1gfj4 7#b7 ,conforming amendments 7,a7 ,clause 7ii7 of section #bhj;,f7a77#a77;,b7 is amended by striking #a1dge in the text and heading and inserting #e1gfj4 7,b7 ,paragraph 7#g7 of section #bhj;,f7d7 is amended-- 7i7 in subparagraph 7,a71 by striking #aihh and inserting #bjah1 and 7ii7 in subparagraph 7,b77i77,,ii71 by striking #aihg and inserting #bjag4 7b7 ,removal of computer equipment from listed property 7#a7 ,in general ,section #bhj;,f7d77#d77;,a7 is amended-- 7,a7 by inserting and at the end of clause 7iii71 7,b7 by striking clause 7iv71 and 7,c7 by redesignating clause 7v7 as clause 7iv74 7#b7 ,conforming amendment ,section #bhj;,f7d77#d7 is amended by striking subparagraph 7,b7 and by redesignating subparagraph 7,c7 as subparagraph 7,b74 7c7 ,effective date ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjag1 in taxable years ending after such date4 #acbjc4 ,modifications of treatment of certain farm property 7a7 ,treatment of certain farm property as #e-,year property ,clause 7vii7 of section #afh7;e77#c77;,b7 is amended by striking after ,december #ca1 #bjjh1 and which is placed in service before ,january #a1 #bjaj and inserting after ,december #ca1 #bjag4 7b7 ,repeal of required use of #aej-,percent declining balance method ,section #afh7;b77#b7 is amended by striking subparagraph 7,b7 and by redesignating subparagraphs 7,c7 and 7,d7 as subparagraphs 7,b7 and 7,c71 respectively4 7c7 ,effective date ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjag1 in taxable years ending after such date4 #acbjd4 ,applicable recovery period for real property 7a7 ,residential rental property and nonresidential real property 7#a7 ,reduction of recovery period ,the table contained in section #afh7;c7 is amended-- 7,a7 by striking #bg4e years and inserting #be years1 and 7,b7 by striking #ci years and inserting #be years4 7#b7 ,statutory recovery period ,the table contained in section #dfg7;e77#c77;,a7 is amended-- 7,a7 by inserting 7other than residential rental property and nonresidential real property7 after #ae-year and #bj-year property1 and 7,b7 by striking #ai years and inserting #be years4 7#c7 ,conforming amendment ,clause 7ii7 of section #afh7;e77#b77;,b7 is amended by striking #bg4e years and inserting #be years4 7b7 ,improvements to real property 7#a7 ,classification of qualified improvement property as #aj-year property ,subparagraph 7,d7 of section #afh7;e77#c7 is amended-- 7,a7 in clause 7iii71 by striking and1 7,b7 in clause 7iv71 by striking the period and inserting 1 and1 and 7,c7 by adding at the end the following new clause3 7v7 any qualified improvement property described in subsection 7e77#f74 4 7#b7 ,elimination of qualified leasehold improvement1 qualified restaurant1 and qualified retail improvement property ,subsection 7e7 of section #afh is amended-- 7,a7 in subparagraph 7,e7 of paragraph 7#c7-- 7i7 by striking clauses 7iv71 7v71 and 7ix71 7ii7 in clause 7vii71 by inserting and at the end1 7iii7 in clause 7viii71 by striking 1 and and inserting a period1 and 7iv7 by redesignating clauses 7vi71 7vii71 and 7viii71 as so amended1 as clauses 7iv71 7v71 and 7vi71 respectively1 and 7,b7 by striking paragraphs 7#f71 7#g71 and 7#h74 7#c7 ,application of straight line method to qualified improvement property ,paragraph 7#c7 of section #afh7;b7 is amended-- 7,a7 by striking subparagraphs 7,g71 7,h71 and 7,i71 and 7,b7 by inserting after subparagraph 7,f7 the following new subparagraph3 7,g7 ,qualified improvement property described in subsection 7e77#f74 4 7#d7 ,alternative ,depreciation ,system 7,a7 ,electing real property trade or business ,subsection 7g7 of section #afh is amended-- 7i7 in paragraph 7#a7-- 7,i7 in subparagraph 7,d71 by striking and at the end1 7,,ii7 in subparagraph 7,e71 by inserting and at the end1 and 7,,iii7 by inserting after subparagraph 7,e7 the following new subparagraph3 7,f7 any property described in paragraph 7#h71 1 and 7ii7 by adding at the end the following new paragraph3 7#h7 ,electing real property trade or business ,the property described in this paragraph shall consist of any nonresidential real property1 residential rental property1 and qualified improvement property held by an electing real property trade or business 7as defined in #afc7;j77#g77;,b774 4 7,b7 ,qualified improvement property ,the table contained in subparagraph 7,b7 of section #afh7;g77#c7 is amended-- 7i7 by inserting after the item relating to subparagraph 7,d77ii7 the following new item3 7,d77v7#bj 4 1 and 7ii7 by striking the item relating to subparagraph 7,e77iv7 and all that follows through the item relating to subparagraph 7,e77ix7 and inserting the following3 7,e77iv7#bj7;,e77v7#cj7;,e77vi7#ce 4 7,c7 ,applicable recovery period for residential rental property ,the table contained in subparagraph 7,c7 of section #afh7;g77#b7 is amended by striking clauses 7iii7 and 7iv7 and inserting the following3 7iii7 ,residential rental property#cj years7iv7 ,nonresidential real property#dj years7v7 ,any railroad grading or tunnel bore or water utility property#ej years 4 7#e7 ,conforming amendments 7,a7 ,clause 7i7 of section #afh7k77#b77;,a7 is amended-- 7i7 in subclause 7,,ii71 by inserting or after the comma1 7ii7 in subclause 7,,iii71 by striking or at the end1 and 7iii7 by striking subclause 7,,iv74 7,b7 ,section #afh is amended-- 7i7 in subsection 7e71 as amended by paragraph 7#b77;,b71 by adding at the end the following3 7#f7 ,qualified improvement property 7,a7 ,in general ,the term qualified improvement property means any improvement to an interior portion of a building which is nonresidential real property if such improvement is placed in service after the date such building was first placed in service4 7,b7 ,certain improvements not included ,such term shall not include any improvement for which the expenditure is attributable to-- 7i7 the enlargement of the building1 7ii7 any elevator or escalator1 or 7iii7 the internal structural framework of the building4 4 7ii7 in subsection 7k71 by striking paragraph 7#c74 7c7 ,effective date 7#a7 ,application ,the amendments made by this section shall apply to property placed in service after ,december #ca1 #bjag4 7#b7 ,shorter recovery period or more accelerated depreciation method ,in the case of property placed in service before ,january #a1 #bjah1 if the amendments made by this section result in-- 7,a7 an applicable recovery period which is less than the applicable recovery period for such property before enactment of such amendments1 or 7,b7 an applicable depreciation method which is more accelerated than the applicable depreciation method for such property before enactment of such amendments1 the depreciation deduction for such property shall1 for any taxable year beginning after ,december #ca1 #bjag1 be determined as if such property were placed in service on ,january #a1 #bjah4 #acbje4 ,use of alternative depreciation system for electing farming businesses 7a7 ,in general ,section #afh7;g77#a71 as amended by section #acbjd1 is amended by striking and at the end of subparagraph 7,e71 by inserting and at the end of subparagraph 7,f71 and by inserting after subparagraph 7,f7 the following new subparagraph3 7,g7 any property with a recovery period of #aj years or more which is held by an electing farming business 7as defined in section #afc7;j77#g77;,c771 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acbjf4 ,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 ,change in method of accounting ,the amendments made by subsection 7a7 shall be treated as a change in method of accounting for purposes of section #dha of the ,internal ,revenue ,code of #aihf and-- 7#a7 such change shall be treated as initiated by the taxpayer1 7#b7 such change shall be treated as made with the consent of the ,secretary1 and 7#c7 such change shall be applied only on a cut-off basis for any research or experimental expenditures paid or incurred in taxable years beginning after ,december #ca1 #bjbe1 and no adjustments under section #dha7;a7 shall be made4 7c7 ,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 7d7 ,conforming amendments 7#a7 ,section #da7;d77#a77;,a7 is amended by striking expenses under section #agd and inserting specified research or experimental expenditures under section #agd4 7#b7 ,subsection 7c7 of section #bhj;,c is amended-- 7,a7 by striking paragraph 7#a7 and inserting the following3 7#a7 ,in general ,if-- 7,a7 the amount of the credit determined for the taxable year under section #da7;a77#a71 exceeds 7,b7 the amount allowable as a deduction for such taxable year for qualified research expenses or basic research expenses1 the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess4 1 7,b7 by striking paragraph 7#b71 7,c7 by redesignating paragraphs 7#c7 7as amended by this ,act7 and 7#d7 as paragraphs 7#b7 and 7#c71 respectively1 and 7,d7 in paragraph 7#b71 as redesignated by subparagraph 7,c71 by striking paragraphs 7#a7 and 7#b7 and inserting paragraph 7#a74 7e7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after ,december #ca1 #bjbe4 #acbjg4 ,expensing of certain costs of replanting citrus plants lost by reason of casualty 7a7 ,in general ,section #bfc;,a7d77#b7 is amended by adding at the end the following new subparagraph3 7,c7 ,special temporary rule for citrus plants lost by reason of casualty 7i7 ,in general ,in the case of the replanting of citrus plants1 subparagraph 7,a7 shall apply to amounts paid or incurred by a person 7other than the taxpayer described in subparagraph 7,a77 if-- 7,i7 the taxpayer described in subparagraph 7,a7 has an equity interest of not less than #ej percent in the replanted citrus plants at all times during the taxable year in which such amounts were paid or incurred and such other person holds any part of the remaining equity interest1 or 7,,ii7 such other person acquired the entirety of such taxpayer's equity interest in the land on which the lost or damaged citrus plants were located at the time of such loss or damage1 and the replanting is on such land4 7ii7 ,termination ,clause 7i7 shall not apply to any cost paid or incurred after the date which is #aj years after the date of the enactment of the ,tax ,cuts and ,jobs ,act4 4 7b7 ,effective date ,the amendment made by this section shall apply to costs paid or incurred after the date of the enactment of this ,act4 ,b ,accounting methods #acbba4 ,certain special rules for taxable year of inclusion 7a7 ,inclusion not later than for financial accounting purposes ,section #dea is amended by redesignating subsections 7b7 through 7i7 as subsections 7c7 through 7j71 respectively1 and by inserting after subsection 7a7 the following new subsection3 7b7 ,inclusion not later than for financial accounting purposes ,notwithstanding part ,v of subchapter ,p-- 7#a7 ,financial statement 7,a7 ,in general ,in the case of a taxpayer the taxable income of which is computed under the accrual method of accounting1 the amount of any portion of any item of gross income shall be included in gross income not later than the taxable year with respect to which such amount is taken into account as income in-- 7i7 an applicable financial statement of the taxpayer1 or 7ii7 such other financial statement as the ,secretary may specify for purposes of this subsection4 7,b7 ,exception ,in the case of a taxpayer which does not have a financial statement described in clause 7i7 or 7ii7 of subparagraph 7,a7 for a taxable year1 such subparagraph shall not apply4 7#b7 ,coordination with special rules for long-term contracts ,paragraph 7#a7 shall not apply with respect to any item of income to which section #dfj applies4 7#c7 ,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 agency for purposes other than ,federal tax purposes1 but only if there is no statement of the taxpayer described in clause 7i7 or 7ii71 7,b7 a financial statement which is made on the basis of international financial reporting standards and is filed by the taxpayer with an agency of a foreign government which is equivalent to the ,united ,states ,securities and ,exchange ,commission and which has reporting standards not less stringent than the standards required by such ,commission1 but only if there is no statement of the taxpayer described in subparagraph 7,a71 or 7,c7 a financial statement filed by the taxpayer with any other regulatory or governmental body specified by the ,secretary1 but only if there is no statement of the taxpayer described in subparagraph 7,a7 or 7,b74 7#d7 ,allocation of transaction price ,for purposes of this subsection1 in the case of a contract which contains multiple performance obligations1 the allocation of the transaction price to each performance obligation shall be equal to the amount allocated to each performance obligation for purposes of including such item in revenue in the applicable financial statement of the taxpayer4 7#e7 ,group of entities ,for purposes of paragraph 7#a71 if the financial results of a taxpayer are reported on the applicable financial statement 7as defined in paragraph 7#c77 for a group of entities1 such statement may be treated as the applicable financial statement of the taxpayer4 4 7b7 ,treatment of advance payments ,section #dea1 as amended by subsection 7a71 is amended by redesignating subsections 7c7 through 7j7 as subsections 7d7 through 7k71 respectively1 and by inserting after subsection 7b7 the following new subsection3 7c7 ,treatment of advance payments 7#a7 ,in general ,a taxpayer which computes taxable income under the accrual method of accounting1 and receives any advance payment during the taxable year1 shall-- 7,a7 except as provided in subparagraph 7,b71 include such advance payment in gross income for such taxable year1 or 7,b7 if the taxpayer elects the application of this subparagraph with respect to the category of advance payments to which such advance payment belongs1 the taxpayer shall-- 7i7 to the extent that any portion of such advance payment is required under subsection 7b7 to be included in gross income in the taxable year in which such payment is received1 so include such portion1 and 7ii7 include the remaining portion of such advance payment in gross income in the taxable year following the taxable year in which such payment is received4 7#b7 ,election 7,a7 ,in general ,except as otherwise provided in this paragraph1 the election under paragraph 7#a77;,b7 shall be made at such time1 in such form and manner1 and with respect to such categories of advance payments1 as the ,secretary may provide4 7,b7 ,period to which election applies ,an election under paragraph 7#a77;,b7 shall be effective for the taxable year with respect to which it is first made and for all subsequent taxable years1 unless the taxpayer secures the consent of the ,secretary to revoke such election4 ,for purposes of this title1 the computation of taxable income under an election made under paragraph 7#a77;,b7 shall be treated as a method of accounting4 7#c7 ,taxpayers ceasing to exist ,except as otherwise provided by the ,secretary1 the election under paragraph 7#a77;,b7 shall not apply with respect to advance payments received by the taxpayer during a taxable year if such taxpayer ceases to exist during 7or with the close of7 such taxable year4 7#d7 ,advance payment ,for purposes of this subsection-- 7,a7 ,in general ,the term advance payment means any payment-- 7i7 the full inclusion of which in the gross income of the taxpayer for the taxable year of receipt is a permissible method of accounting under this section 7determined without regard to this subsection71 7ii7 any portion of which is included in revenue by the taxpayer in a financial statement described in clause 7i7 or 7ii7 of subsection 7b77#a77;,a7 for a subsequent taxable year1 and 7iii7 which is for goods1 services1 or such other items as may be identified by the ,secretary for purposes of this clause4 7,b7 ,exclusions ,except as otherwise provided by the ,secretary1 such term shall not include-- 7i7 rent1 7ii7 insurance premiums governed by subchapter ,l1 7iii7 payments with respect to financial instruments1 7iv7 payments with respect to warranty or guarantee contracts under which a third party is the primary obligor1 7v7 payments subject to section #hga7;a71 #hha1 #adda1 or #addb1 7vi7 payments in property to which section #hc applies1 and 7vii7 any other payment identified by the ,secretary for purposes of this subparagraph4 7,c7 ,receipt ,for purposes of this subsection1 an item of gross income is received by the taxpayer if it is actually or constructively received1 or if it is due and payable to the taxpayer4 7,d7 ,allocation of transaction price ,for purposes of this subsection1 rules similar to subsection 7b77#d7 shall apply4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7d7 ,coordination with section #dha 7#a7 ,in general ,in the case of any qualified change in method of accounting for the taxpayer's first taxable year beginning after ,december #ca1 #bjag-- 7,a7 such change shall be treated as initiated by the taxpayer1 and 7,b7 such change shall be treated as made with the consent of the ,secretary of the ,treasury4 7#b7 ,qualified change in method of accounting ,for purposes of this subsection1 the term qualified change in method of accounting means any change in method of accounting which-- 7,a7 is required by the amendments made by this section1 or 7,b7 was prohibited under the ,internal ,revenue ,code of #aihf prior to such amendments and is permitted under such ,code after such amendments4 ,,iv ,business-related exclusions and deductions #accja4 ,limitation on deduction for interest 7a7 ,in general ,section #afc7;j7 is amended to read as follows3 7j7 ,limitation on business interest 7#a7 ,in general ,the amount allowed as a deduction under this chapter for any taxable year for business interest shall not exceed the sum of-- 7,a7 the business interest income of such taxpayer for such taxable year1 plus 7,b7 #cj percent of the adjusted taxable income of such taxpayer for such taxable year4 ,the amount determined under subparagraph 7,b7 shall not be less than zero4 7#b7 ,carryforward of disallowed business interest ,the amount of any business interest not allowed as a deduction for any taxable year by reason of paragraph 7#a7 shall be treated as business interest paid or accrued in the succeeding taxable year4 7#c7 ,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 7#d7 ,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 and 7ii7 the adjusted taxable income of each partner of such partnership-- 7,i7 shall be determined without regard to such partner's distributive share of the non-separately stated taxable income or loss of such partnership1 and 7,,ii7 shall be increased by such partner's distributive share of such partnership's excess taxable income4 ,for purposes of clause 7ii77,,ii71 a partner's distributive share of partnership excess taxable income shall be determined in the same manner as the partner's distributive share of nonseparately stated taxable income or loss of the partnership4 7,b7 ,special rules for carryforwards 7i7 ,in general ,the amount of any business interest not allowed as a deduction to a partnership for any taxable year by reason of paragraph 7#a7 for any taxable year-- 7,i7 shall not be treated under paragraph 7#b7 as business interest paid or accrued by the partnership in the succeeding taxable year1 and 7,,ii7 shall1 subject to clause 7ii71 be treated as excess business interest which is allocated to each partner in the same manner as the non-separately stated taxable income or loss of the partnership4 7ii7 ,treatment of excess business interest allocated to partners ,if a partner is allocated any excess business interest from a partnership under clause 7i7 for any taxable year-- 7,i7 such excess business interest shall be treated as business interest paid or accrued by the partner in the next succeeding taxable year in which the partner is allocated excess taxable income from such partnership1 but only to the extent of such excess taxable income1 and 7,,ii7 any portion of such excess business interest remaining after the application of subclause 7,i7 shall1 subject to the limitations of subclause 7,i71 be treated as business interest paid or accrued in succeeding taxable years4 ,for purposes of applying this paragraph1 excess taxable income allocated to a partner from a partnership for any taxable year shall not be taken into account under paragraph 7#a77;,a7 with respect to any business interest other than excess business interest from the partnership until all such excess business interest for such taxable year and all preceding taxable years has been treated as paid or accrued under clause 7ii74 7iii7 ,basis adjustments 7,i7 ,in general ,the adjusted basis of a partner in a partnership interest shall be reduced 7but not below zero7 by the amount of excess business interest allocated to the partner under clause 7i77,,ii74 7,,ii7 ,special rule for dispositions ,if a partner disposes of a partnership interest1 the adjusted basis of the partner in the partnership interest shall be increased immediately before the disposition by the amount of the excess 7if any7 of the amount of the basis reduction under subclause 7,i7 over the portion of any excess business interest allocated to the partner under clause 7i77,,ii7 which has previously been treated under clause 7ii7 as business interest paid or accrued by the partner4 ,the preceding sentence shall also apply to transfers of the partnership interest 7including by reason of death7 in a transaction in which gain is not recognized in whole or in part4 ,no deduction shall be allowed to the transferor or transferee under this chapter for any excess business interest resulting in a basis increase under this subclause4 7,c7 ,excess taxable income ,the term excess taxable income means1 with respect to any partnership1 the amount which bears the same ratio to the partnership's adjusted taxable income as-- 7i7 the excess 7if any7 of-- 7,i7 the amount determined for the partnership under paragraph 7#a77;,b71 over 7,,ii7 the amount 7if any7 by which the business interest of the partnership exceeds the business interest income of the partnership1 bears to 7ii7 the amount determined for the partnership under paragraph 7#a77;,b74 7,d7 ,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#e7 ,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#f7 ,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#g7 ,trade or business ,for purposes of this subsection-- 7,a7 ,in general ,the term trade or business shall not include-- 7i7 the trade or business of performing services as an employee1 7ii7 any electing real property trade or business1 7iii7 any electing farming business1 or 7iv7 the trade or business of the furnishing or sale of-- 7,i7 electrical energy1 water1 or sewage disposal services1 7,,ii7 gas or steam through a local distribution system1 or 7,,iii7 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 by a public service or public utility commission or other similar body of any ,state or political subdivision thereof1 or by the governing or ratemaking body of an electric cooperative4 7,b7 ,electing real property trade or business ,for purposes of this paragraph1 the term electing real property trade or business means any trade or business which is described in section #dfi7;c77#g77;,c7 and which makes an election under this subparagraph4 ,any such election shall be made at such time and in such manner as the ,secretary shall prescribe1 and1 once made1 shall be irrevocable4 7,c7 ,electing farming business ,for purposes of this paragraph1 the term electing farming business means a farming business 7as defined in section #bfc;,a7e77#d77 which makes an election under this subparagraph4 ,any such election shall be made at such time and in such manner as the ,secretary shall prescribe1 and1 once made1 shall be irrevocable4 7#h7 ,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 the amount of any deduction allowed under section #aii or #aii;,a1 and 7,b7 computed with such other adjustments as provided by the ,secretary4 7#i7 ,cross references 7,a7 ,for requirement that an electing real property trade or business use the alternative depreciation system1 see section #afh7;g77#a77;,f74 7,b7 ,for requirement that an electing farming business use the alternative depreciation system1 see section #afh7;g77#a77;,g74 4 7b7 ,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 business interest ,the carryover of disallowed business interest described in section #afc7;j77#b7 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 #afc7n7 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#bj744 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #accjb4 ,modification of net operating loss deduction 7a7 ,limitation on deduction 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 7#hj percent in the case of taxable years beginning after ,december #ca1 #bjbb7 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 7b7 ,repeal of net operating loss carryback2 indefinite carryforward 7#a7 ,in general ,section #agb7;b77#a77;,a7 is amended-- 7,a7 by striking shall be a net operating loss carryback to each of the #b taxable years in clause 7i7 and inserting except as otherwise provided in this paragraph1 shall not be a net operating loss carryback to any taxable year1 and 7,b7 by striking to each of the #bj taxable years in clause 7ii7 and inserting to each taxable year4 7#b7 ,conforming amendment ,section #agb7;b77#a7 is amended by striking subparagraphs 7,b7 through 7,f74 7c7 ,treatment of farming losses 7#a7 ,allowance of carrybacks ,section #agb7;b77#a71 as amended by subsection 7b77#b71 is amended by adding at the end the following new subparagraph3 7,b7 ,farming losses 7i7 ,in general ,in the case of any portion of a net operating loss for the taxable year which is a farming loss with respect to the taxpayer1 such loss shall be a net operating loss carryback to each of the #b taxable years preceding the taxable year of such loss4 7ii7 ,farming loss ,for purposes of this section1 the term farming loss means the lesser of-- 7,i7 the amount which would be the net operating loss for the taxable year if only income and deductions attributable to farming businesses 7as defined in section #bfc;,a7e77#d77 are taken into account1 or 7,,ii7 the amount of the net operating loss for such taxable year4 7iii7 ,coordination with paragraph 7#b7 ,for purposes of applying paragraph 7#b71 a farming loss for any taxable year shall be treated as a separate net operating loss for such taxable year to be taken into account after the remaining portion of the net operating loss for such taxable year4 7iv7 ,election ,any taxpayer entitled to a #b-year carryback under clause 7i7 from any loss year may elect not to have such clause apply to such loss year4 ,such election shall be made in such manner as prescribed by the ,secretary and shall be made by the due date 7including extensions of time7 for filing the taxpayer's return for the taxable year of the net operating loss4 ,such election1 once made for any taxable year1 shall be irrevocable for such taxable year4 4 7#b7 ,conforming amendments 7,a7 ,section #agb is amended by striking subsections 7f71 7g71 and 7h71 and by redesignating subsection 7i7 as subsection 7f74 7,b7 ,section #ecg7;b77#d7 is amended by inserting 7as in effect before the date of enactment of the ,tax ,cuts and ,jobs ,act7 after as defined in section #agb7;f74 7d7 ,treatment of certain insurance losses 7#a7 ,treatment of carryforwards and carrybacks ,section #agb7;b77#a71 as amended by subsections 7b77#b7 and 7c77#a71 is amended by adding at the end the following new subparagraph3 7,c7 ,insurance companies ,in the case of an insurance company 7as defined in section #haf7;a77 other than a life insurance company1 the net operating loss for any taxable year-- 7i7 shall be a net operating loss carryback to each of the #b taxable years preceding the taxable year of such loss1 and 7ii7 shall be a net operating loss carryover to each of the #bj taxable years following the taxable year of the loss4 4 7#b7 ,exemption from limitation ,section #agb1 as amended by subsection 7c77#b77;,a71 is amended by redesignating subsection 7f7 as subsection 7g7 and inserting after subsection 7e7 the following new subsection3 7f7 ,special rule for insurance companies ,in the case of an insurance company 7as defined in section #haf7;a77 other than a life insurance company-- 7#a7 the amount of the deduction allowed under subsection 7a7 shall be the aggregate of the net operating loss carryovers to such year1 plus the net operating loss carrybacks to such year1 and 7#b7 subparagraph 7,c7 of subsection 7b77#b7 shall not apply4 4 7e7 ,effective date 7#a7 ,net operating loss limitation ,the amendments made by subsections 7a7 and 7d77#b7 shall apply to losses arising in taxable years beginning after ,december #ca1 #bjag4 7#b7 ,carryforwards and carrybacks ,the amendments made by subsections 7b71 7c71 and 7d77#a7 shall apply to net operating losses arising in taxable years ending after ,december #ca1 #bjag4 #accjc4 ,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 7e74 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 ,section #ajca7;i7 is amended to read as follows3 7i7 ,special rules for mutual ditch1 reservoir1 or irrigation company stock ,for purposes of subsection 7a71 shares in a mutual ditch1 reservoir1 or irrigation company shall be treated as real property if at the time of the exchange-- 7#a7 the mutual ditch1 reservoir1 or irrigation company is an organization described in section #eja7;c77#ab77;,a7 7determined without regard to the percentage of its income that is collected from its members for the purpose of meeting losses and expenses71 and 7#b7 the shares in such company have been recognized by the highest court of the ,state in which such company was organized or by applicable ,state statute as constituting or representing real property or an interest in real property4 4 7#f7 ,the heading of section #ajca is amended by striking property and inserting real property4 7#g7 ,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 #accjd4 ,limitation on deduction by employers of expenses for fringe benefits 7a7 ,no deduction allowed for entertainment expenses 7#a7 ,in general ,section #bgd7;a7 is amended-- 7,a7 in paragraph 7#a77;,a71 by striking unless and all that follows through trade or business11 7,b7 by striking the flush sentence at the end of paragraph 7#a71 and 7,c7 by striking paragraph 7#b77;,c74 7#b7 ,conforming amendments 7,a7 ,section #bgd7;d7 is amended-- 7i7 by striking paragraph 7#b7 and redesignating paragraphs 7#c7 and 7#d7 as paragraphs 7#b7 and 7#c71 respectively1 and 7ii7 in the flush text following paragraph 7#c7 7as so redesignated7-- 7,i7 by striking 1 entertainment1 amusement1 recreation1 or use of the facility or property1 in item 7,b71 and 7,,ii7 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 benefit1 7,b7 ,section #bgd is amended by striking subsection 7l74 7,c7 ,section #bgd7n7 is amended by striking and entertainment in the heading4 7,d7 ,section #bgd7n77#a7 is amended to read as follows3 7#a7 ,in general ,the amount allowable as a deduction under this chapter for any expense for food or beverages shall not exceed #ej percent of the amount of such expense which would 7but for this paragraph7 be allowable as a deduction under this chapter4 4 7,e7 ,section #bgd7n77#b7 is amended-- 7i7 in subparagraph 7,b71 by striking in the case of an expense for food or beverages11 7ii7 by striking subparagraph 7,c7 and redesignating subparagraphs 7,d7 and 7,e7 as subparagraphs 7,c7 and 7,d71 respectively1 7iii7 by striking of subparagraph 7,e7 the last sentence and inserting of subparagraph 7,d71 and 7iv7 by striking in subparagraph 7,d7 in the last sentence and inserting in subparagraph 7,c74 7,f7 ,clause 7iv7 of section #ggja7;b77#e77;,a7 is amended to read as follows3 7iv7 a professional athlete who is temporarily in the ,united ,states to compete in a sports event-- 7,i7 which is organized for the primary purpose of benefiting an organization which is described in section #eja7;c77#c7 and exempt from tax under section #eja7;a71 7,,ii7 all of the net proceeds of which are contributed to such organization1 and1 7,,iii7 which utilizes volunteers for substantially all of the work performed in carrying out such event4 4 7b7 ,only #ej percent of expenses for meals provided on or near business premises allowed as deduction ,paragraph 7#b7 of section #bgd7n71 as amended by subsection 7a71 is amended-- 7#a7 by striking subparagraph 7,b71 7#b7 by redesignating subparagraphs 7,c7 and 7,d7 as subparagraphs 7,b7 and 7,c71 respectively1 7#c7 by striking of subparagraph 7,d7 in the last sentence and inserting of subparagraph 7,c71 and 7#d7 by striking in subparagraph 7,c7 in the last sentence and inserting in subparagraph 7,b74 7c7 ,treatment of transportation benefits ,section #bgd1 as amended by subsection 7a71 is amended-- 7#a7 in subsection 7a7-- 7,a7 in the heading1 by striking or recreation and inserting recreation1 or qualified transportation fringes1 and 7,b7 by adding at the end the following new paragraph3 7#d7 ,qualified transportation fringes ,no deduction shall be allowed under this chapter for the expense of any qualified transportation fringe 7as defined in section #acb7;f77 provided to an employee of the taxpayer4 1 and 7#b7 by inserting after subsection 7k7 the following new subsection3 7l7 ,transportation and commuting benefits ,no deduction shall be allowed under this chapter for any expense incurred for providing any transportation1 or any payment or reimbursement1 to an employee of the taxpayer in connection with travel between the employee's residence and place of employment1 except as necessary for ensuring the safety of the employee4 4 7d7 ,elimination of deduction for meals provided at convenience of employer ,section #bgd1 as amended by subsection 7c71 is amended-- 7#a7 by redesignating subsection 7o7 as subsection 7p71 and 7#b7 by inserting after subsection 7n7 the following new subsection3 7o7 ,meals provided at convenience of employer ,no deduction shall be allowed under this chapter for-- 7#a7 any expense for the operation of a facility described in section #acb7;e77#b71 and any expense for food or beverages1 including under section #acb7;e77#a71 associated with such facility1 or 7#b7 any expense for meals described in section #aai7;a74 4 7e7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to amounts incurred or paid after ,december #ca1 #bjag4 7#b7 ,effective date for elimination of deduction for meals provided at convenience of employer ,the amendments made by subsection 7d7 shall apply to amounts incurred or paid after ,december #ca1 #bjbe4 #accje4 ,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 #ace7;c77#d77;,a71 #acg7;b77#c77;,a71 #bai7;g77#c77;,a77ii71 #bba7;b77#b77;,c71 #bbb7;b77#b77;,c71 #bdf7;b77#a71 and #dfi7;i77#c77;,f77iii7 are each amended by striking #aii14 7#b7 ,section #agj7;b77#b77;,d71 as amended by section #aajaa1 is amended by striking clause 7iv7 and by redesignating clauses 7v7 and 7vi7 as redesignating clauses 7iv7 as clause 7v71 respectively4 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,d74 7c7 ,effective date ,the amendments made by this subsection shall apply to taxable years beginning after ,december #ca1 #bjah4 #accjf4 ,denial of deduction for certain fines1 penalties1 and other amounts 7a7 ,denial of deduction 7#a7 ,in general ,subsection 7f7 of section #afb is amended to read as follows3 7f7 ,fines1 ,penalties1 and ,other ,amounts 7#a7 ,in general ,except as provided in the following paragraphs of this subsection1 no deduction otherwise allowable shall be allowed under this chapter for any amount paid or incurred 7whether by suit1 agreement1 or otherwise7 to1 or at the direction of1 a government or governmental entity in relation to the violation of any law or the investigation or inquiry by such government or entity into the potential violation of any law4 7#b7 ,exception for amounts constituting restitution or paid to come into compliance with law 7,a7 ,in general ,paragraph 7#a7 shall not apply to any amount that-- 7i7 the taxpayer establishes-- 7,i7 constitutes restitution 7including remediation of property7 for damage or harm which was or may be caused by the violation of any law or the potential violation of any law1 or 7,,ii7 is paid to come into compliance with any law which was violated or otherwise involved in the investigation or inquiry described in paragraph 7#a71 7ii7 is identified as restitution or as an amount paid to come into compliance with such law1 as the case may be1 in the court order or settlement agreement1 and 7iii7 in the case of any amount of restitution for failure to pay any tax imposed under this title in the same manner as if such amount were such tax1 would have been allowed as a deduction under this chapter if it had been timely paid4 ,the identification under clause 7ii7 alone shall not be sufficient to make the establishment required under clause 7i74 7,b7 ,limitation ,subparagraph 7,a7 shall not apply to any amount paid or incurred as reimbursement to the government or entity for the costs of any investigation or litigation4 7#c7 ,exception for amounts paid or incurred as the result of certain court orders ,paragraph 7#a7 shall not apply to any amount paid or incurred by reason of any order of a court in a suit in which no government or governmental entity is a party4 7#d7 ,exception for taxes due ,paragraph 7#a7 shall not apply to any amount paid or incurred as taxes due4 7#e7 ,treatment of certain nongovernmental regulatory entities ,for purposes of this subsection1 the following nongovernmental entities shall be treated as governmental entities3 7,a7 ,any nongovernmental entity which exercises self-regulatory powers 7including imposing sanctions7 in connection with a qualified board or exchange 7as defined in section #abef7;g77#g774 7,b7 ,to the extent provided in regulations1 any nongovernmental entity which exercises self-regulatory powers 7including imposing sanctions7 as part of performing an essential governmental function4 4 7#b7 ,effective ,date ,the amendment made by this subsection shall apply to amounts paid or incurred on or after the date of the enactment of this ,act1 except that such amendments shall not apply to amounts paid or incurred under any binding order or agreement entered into before such date4 ,such exception shall not apply to an order or agreement requiring court approval unless the approval was obtained before such date4 7b7 ,reporting of deductible amounts 7#a7 ,in general ,subpart ,b of part ,,iii of subchapter ,a of chapter #fa is amended by inserting after section #fjej,w the following new section3 #fjej,x4 ,information with respect to certain fines1 penalties1 and other amounts 7a7 ,requirement of reporting 7#a7 ,in general ,the appropriate official of any government or any entity described in section #afb7;f77#e7 which is involved in a suit or agreement described in paragraph 7#b7 shall make a return in such form as determined by the ,secretary setting forth-- 7,a7 the amount required to be paid as a result of the suit or agreement to which paragraph 7#a7 of section #afb7;f7 applies1 7,b7 any amount required to be paid as a result of the suit or agreement which constitutes restitution or remediation of property1 and 7,c7 any amount required to be paid as a result of the suit or agreement for the purpose of coming into compliance with any law which was violated or involved in the investigation or inquiry4 7#b7 ,suit or agreement described 7,a7 ,in general ,a suit or agreement is described in this paragraph if-- 7i7 it is-- 7,i7 a suit with respect to a violation of any law over which the government or entity has authority and with respect to which there has been a court order1 or 7,,ii7 an agreement which is entered into with respect to a violation of any law over which the government or entity has authority1 or with respect to an investigation or inquiry by the government or entity into the potential violation of any law over which such government or entity has authority1 and 7ii7 the aggregate amount involved in all court orders and agreements with respect to the violation1 investigation1 or inquiry is #fjj or more4 7,b7 ,adjustment of reporting threshold ,the ,secretary shall adjust the #fjj amount in subparagraph 7,a77ii7 as necessary in order to ensure the efficient administration of the internal revenue laws4 7#c7 ,time of filing ,the return required under this subsection shall be filed at the time the agreement is entered into1 as determined by the ,secretary4 7b7 ,statements ,to be furnished to individuals involved in the settlement ,every person required to make a return under subsection 7a7 shall furnish to each person who is a party to the suit or agreement a written statement showing-- 7#a7 the name of the government or entity1 and 7#b7 the information supplied to the ,secretary under subsection 7a77#a74 ,the written statement required under the preceding sentence shall be furnished to the person at the same time the government or entity provides the ,secretary with the information required under subsection 7a74 7c7 ,appropriate official defined ,for purposes of this section1 the term appropriate official means the officer or employee having control of the suit1 investigation1 or inquiry or the person appropriately designated for purposes of this section4 4 7#b7 ,conforming amendment ,the table of sections for subpart ,b of part ,,iii of subchapter ,a of chapter #fa is amended by inserting after the item relating to section #fjej,w the following new item3 ,sec4 #fjej,x4 ,information with respect to certain fines1 penalties1 and other amounts4 4 7#c7 ,effective ,date ,the amendments made by this subsection shall apply to amounts paid or incurred on or after the date of the enactment of this ,act1 except that such amendments shall not apply to amounts paid or incurred under any binding order or agreement entered into before such date4 ,such exception shall not apply to an order or agreement requiring court approval unless the approval was obtained before such date4 #accjg4 ,denial of deduction for settlements subject to nondisclosure agreements paid in connection with sexual harassment or sexual abuse 7a7 ,denial of deduction ,section #afb is amended by redesignating subsection 7q7 as subsection 7r7 and by inserting after subsection 7p7 the following new subsection3 7q7 ,payments related to sexual harassment and sexual abuse ,no deduction shall be allowed under this chapter for-- 7#a7 any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement1 or 7#b7 attorney's fees related to such a settlement or payment4 4 7b7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this ,act4 #accjh4 ,uniform treatment of expenses in contingency fee cases 7a7 ,in general ,section #afb1 as amended by section #accjg1 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 #accji4 ,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 on or after the date of the enactment of this ,act4 #accaj4 ,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 gain1 notwithstanding section #hc or any election in effect under section #hc7;b74 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 ,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 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,v ,business credits ,a ,general provisions #acdja4 ,modification of orphan drug credit 7a7 ,credit rate ,subsection 7a7 of section #de;,c is amended by striking #ej percent and inserting #bg4e percent4 7b7 ,disclosure of credits ,section #de;,c is amended by adding at the end the following new subsection3 7e7 ,disclosure of credits ,the ,secretary shall publicly disclose the identity of any taxpayer 7in the case of a pass-thru entity1 the name of the entity7 to whom a credit is allowed under this section1 as well as the amount of such credit1 the drug with respect to which the qualified clinical testing expenses were taken into account under this section1 and the rare disease or condition for which such drug was being tested4 4 7c7 ,election of reduced credit ,subsection 7b7 of section #bhj;,c is amended by redesignating paragraph 7#c7 as paragraph 7#d7 and by inserting after paragraph 7#b7 the following new paragraph3 7#c7 ,election of reduced credit 7,a7 ,in general ,in the case of any taxable year for which an election is made under this paragraph-- 7i7 paragraphs 7#a7 and 7#b7 shall not apply1 and 7ii7 the amount of the credit under section #de;,c7a7 shall be the amount determined under subparagraph 7,b74 7,b7 ,amount of reduced credit ,the amount of credit determined under this subparagraph for any taxable year shall be the amount equal to the excess of-- 7i7 the amount of credit determined under section #de;,c7a7 without regard to this paragraph1 over 7ii7 the product of-- 7,i7 the amount described in clause 7i71 and 7,,ii7 the maximum rate of tax under section #aa7;b74 7,c7 ,election ,an election under this paragraph for any taxable year shall be made not later than the time for filing the return of tax for such year 7including extensions71 shall be made on such return1 and shall be made in such manner as the ,secretary shall prescribe4 ,such an election1 once made1 shall be irrevocable4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acdjb4 ,rehabilitation credit limited to certified historic structures 7a7 ,in general ,subsection 7a7 of section #dg is amended to read as follows3 7a7 ,general rule 7#a7 ,in general ,for purposes of section #df1 for any taxable year during the #e-year period beginning in the taxable year in which a qualified rehabilitated building is placed in service1 the rehabilitation credit for such year is an amount equal to the ratable share for such year4 7#b7 ,ratable share ,for purposes of paragraph 7#a71 the ratable share for any taxable year during the period described in such paragraph is the amount equal to #bj percent of the qualified rehabilitation expenditures with respect to the qualified rehabilitated building1 as allocated ratably to each year during such period4 4 7b7 ,conforming amendments 7#a7 ,section #dg7;c7 is amended-- 7,a7 in paragraph 7#a7-- 7i7 in subparagraph 7,a71 by amending clause 7iii7 to read as follows3 7iii7 such building is a certified historic structure1 and 1 7ii7 by striking subparagraph 7,b71 and 7iii7 by redesignating subparagraphs 7,c7 and 7,d7 as subparagraphs 7,b7 and 7,c71 respectively1 and 7,b7 in paragraph 7#b77;,b71 by amending clause 7iv7 to read as follows3 7iv7 ,certified historic structure ,any expenditure attributable to the rehabilitation of a qualified rehabilitated building unless the rehabilitation is a certified rehabilitation 7within the meaning of subparagraph 7,c774 4 7#b7 ,paragraph 7#d7 of section #ade7;d7 is amended-- 7,a7 by striking of section #dg7;c77#a77;,c7 each place it appears and inserting of section #dg7;c77#a77;,b71 and 7,b7 by striking section #dg7;c77#a77;,c77i7 and inserting section #dg7;c77#a77;,b77i74 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 with respect to any building-- 7,a7 owned or leased by the taxpayer during the entirety of the period after ,december #ca1 #bjag1 and 7,b7 with respect to which the #bd-month period selected by the taxpayer under section #dg7;c77#a77;,b7 of the ,internal ,revenue ,code of #aihf 7as amended by subsection 7b77 begins not later than #ahj days after 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 #acdjc4 ,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 #acdjd4 ,employer credit for paid family and medical leave 7a7 ,in general 7#a7 ,allowance of credit ,subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by adding at the end the following new section3 #de,s4 ,employer credit for paid family and medical leave 7a7 ,establishment of credit 7#a7 ,in general ,for purposes of section #ch1 in the case of an eligible employer1 the paid family and medical leave credit is an amount equal to the applicable percentage of the amount of wages paid to qualifying employees during any period in which such employees are on family and medical leave4 7#b7 ,applicable percentage ,for purposes of paragraph 7#a71 the term applicable percentage means #ab4e percent increased 7but not above #be percent7 by #j4be percentage points for each percentage point by which the rate of payment 7as described under subsection 7c77#a77;,b77 exceeds #ej percent4 7b7 ,limitation 7#a7 ,in general ,the credit allowed under subsection 7a7 with respect to any employee for any taxable year shall not exceed an amount equal to the product of the normal hourly wage rate of such employee for each hour 7or fraction thereof7 of actual services performed for the employer and the number of hours 7or fraction thereof7 for which family and medical leave is taken4 7#b7 ,non-hourly wage rate ,for purposes of paragraph 7#a71 in the case of any employee who is not paid on an hourly wage rate1 the wages of such employee shall be prorated to an hourly wage rate under regulations established by the ,secretary4 7#c7 ,maximum amount of leave subject to credit ,the amount of family and medical leave that may be taken into account with respect to any employee under subsection 7a7 for any taxable year shall not exceed #ab weeks4 7c7 ,eligible employer ,for purposes of this section-- 7#a7 ,in general ,the term eligible employer means any employer who has in place a policy that meets the following requirements3 7,a7 ,the policy provides-- 7i7 in the case of a qualifying employee who is not a part-time employee 7as defined in section #dihj;,e7d77#d77;,b771 not less than #b weeks of annual paid family and medical leave1 and 7ii7 in the case of a qualifying employee who is a part-time employee1 an amount of annual paid family and medical leave that is not less than an amount which bears the same ratio to the amount of annual paid family and medical leave that is provided to a qualifying employee described in clause 7i7 as-- 7,i7 the number of hours the employee is expected to work during any week1 bears to 7,,ii7 the number of hours an equivalent qualifying employee described in clause 7i7 is expected to work during the week4 7,b7 ,the policy requires that the rate of payment under the program is not less than #ej percent of the wages normally paid to such employee for services performed for the employer4 7#b7 ,special rule for certain employers 7,a7 ,in general ,an added employer shall not be treated as an eligible employer unless such employer provides paid family and medical leave in compliance with a policy which ensures that the employer-- 7i7 will not interfere with1 restrain1 or deny the exercise of or the attempt to exercise1 any right provided under the policy1 and 7ii7 will not discharge or in any other manner discriminate against any individual for opposing any practice prohibited by the policy4 7,b7 ,added employer2 added employee ,for purposes of this paragraph-- 7i7 ,added employee ,the term added employee means a qualifying employee who is not covered by title ,i of the ,family and ,medical ,leave ,act of #aiic1 as amended4 7ii7 ,added employer ,the term added employer means an eligible employer 7determined without regard to this paragraph71 whether or not covered by that title ,i1 who offers paid family and medical leave to added employees4 7#c7 ,aggregation rule ,all persons which are treated as a single employer under subsections 7a7 and 7b7 of section #eb shall be treated as a single taxpayer4 7#d7 ,treatment of benefits mandated or paid for by ,state or local governments ,for purposes of this section1 any leave which is paid by a ,state or local government or required by ,state or local law shall not be taken into account in determining the amount of paid family and medical leave provided by the employer4 7#e7 ,no inference ,nothing in this subsection shall be construed as subjecting an employer to any penalty1 liability1 or other consequence 7other than ineligibility for the credit allowed by reason of subsection 7a7 or recapturing the benefit of such credit7 for failure to comply with the requirements of this subsection4 7d7 ,qualifying employees ,for purposes of this section1 the term qualifying employee means any employee 7as defined in section #c7;e7 of the ,fair ,labor ,standards ,act of #aich1 as amended7 who-- 7#a7 has been employed by the employer for #a year or more1 and 7#b7 for the preceding year1 had compensation not in excess of an amount equal to #fj percent of the amount applicable for such year under clause 7i7 of section #dad7q77#a77;,b74 7e7 ,family and medical leave 7#a7 ,in general ,except as provided in paragraph 7#b71 for purposes of this section1 the term family and medical leave means leave for any #a or more of the purposes described under subparagraph 7,a71 7,b71 7,c71 7,d71 or 7,e7 of paragraph 7#a71 or paragraph 7#c71 of section #ajb7;a7 of the ,family and ,medical ,leave ,act of #aiic1 as amended1 whether the leave is provided under that ,act or by a policy of the employer4 7#b7 ,exclusion ,if an employer provides paid leave as vacation leave1 personal leave1 or medical or sick leave 7other than leave specifically for #a or more of the purposes referred to in paragraph 7#a771 that paid leave shall not be considered to be family and medical leave under paragraph 7#a74 7#c7 ,definitions ,in this subsection1 the terms vacation leave1 personal leave1 and medical or sick leave mean those #c types of leave1 within the meaning of section #ajb7;d77#b7 of that ,act4 7f7 ,wages ,for purposes of this section1 the term wages has the meaning given such term by subsection 7b7 of section #ccjf 7determined without regard to any dollar limitation contained in such section74 ,such term shall not include any amount taken into account for purposes of determining any other credit allowed under this subpart4 7g7 ,election to have credit not apply 7#a7 ,in general ,a taxpayer may elect to have this section not apply for any taxable year4 7#b7 ,other rules ,rules similar to the rules of paragraphs 7#b7 and 7#c7 of section #ea7;j7 shall apply for purposes of this subsection4 7h7 ,termination ,this section shall not apply to wages paid in taxable years beginning after ,december #ca1 #bjai4 4 7b7 ,credit part of general business credit ,section #ch7;b7 is amended by striking plus at the end of paragraph 7#ce71 by striking the period at the end of paragraph 7#cf7 and inserting 1 plus1 and by adding at the end the following new paragraph3 7#cg7 in the case of an eligible employer 7as defined in section #de,s7c771 the paid family and medical leave credit determined under section #de,s7a74 4 7c7 ,credit allowed against ,,amt ,subparagraph 7,b7 of section #ch7;c77#d7 is amended by redesignating clauses 7ix7 through 7xi7 as clauses 7x7 through 7xii71 respectively1 and by inserting after clause 7viii7 the following new clause3 7ix7 the credit determined under section #de,s1 4 7d7 ,conforming amendments 7#a7 ,denial of double benefit ,section #bhj;,c7a7 is amended by inserting #de,s7a71 after #de,p7a714 7#b7 ,election to have credit not apply ,section #feja7m7 is amended by inserting #de,s7g71 after #de;,h7g714 7#c7 ,clerical amendment ,the table of sections for subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended by adding at the end the following new item3 ,sec4 #de,s4 ,employer credit for paid family and medical leave4 4 7e7 ,effective date ,the amendments made by this section shall apply to wages paid in taxable years beginning after ,december #ca1 #bjag4 ,b ,provisions relating to low-income housing credit #acdaa4 ,reconstruction or replacement period after casualty loss 7a7 ,in general ,subparagraph 7,e7 of section #db7;j77#d7 is amended by striking a reasonable period established by the ,secretary and inserting a reasonable period established by the applicable housing credit agency 7not to exceed #be months from the date on which the casualty loss arises74 ,the determination under paragraph 7#a7 shall not be made with respect to a property the basis of which is affected by a casualty loss until the period described in the preceding sentence with respect to such property has expired44 7b7 ,effective date ,the amendment made by this section shall apply to casualty losses arising after the date of the enactment of this ,act4 #acdab4 ,modification of rights relating to building purchase 7a7 ,in general ,subparagraph 7,a7 of section #db7;i77#g7 is amended-- 7#a7 by striking a right of #ast refusal and inserting an option1 and 7#b7 by striking the property and inserting the property or a partnership interest relating to the property4 7b7 ,conforming amendment ,subparagraph 7,b7 of section #db7;i77#g7 is amended by adding at the end the following new sentence3 ,in the case of a purchase of a partnership interest1 the minimum purchase price is an amount equal to such interest's ratable share of the amount determined under the first sentence of this subparagraph44 7c7 ,effective date ,the amendments made by this section shall apply to agreements entered into or amended after the date of the enactment of this ,act4 #acdac4 ,determination of community revitalization plan to be made by housing credit agency 7a7 ,in general ,subclause 7,,iii7 of section #db7m77#a77;,b77ii7 is amended by inserting 1 as determined by the housing credit agency according to criteria established by such agency1 after 7d77#e77;,c77 and4 7b7 ,criteria ,paragraph 7#a7 of section #db7m7 is amended by adding at the end the following new subparagraph3 7,e7 ,criteria for determination relating to concerted community revitalization plan ,for purposes of subparagraph 7,b77ii77,,iii71 the criteria for determining whether the development of a project contributes to a concerted community development plan shall take into account any factors the agency deems appropriate1 including the extent to which the proposed plan-- 7i7 is geographically specific1 7ii7 outlines a clear plan for implementation and goals for outcomes1 7iii7 includes a strategy for applying for or obtaining commitments of public or private investment 7or both7 in nonhousing infrastructure1 amenities1 or services1 and 7iv7 demonstrates the need for community revitalization4 4 7c7 ,effective date ,the amendments made by this section shall apply to allocations of housing credit dollar amounts made under qualified allocation plans 7as defined in section #db7m77#a77;,b7 of the ,internal ,revenue ,code of #aihf7 adopted after ,december #ca1 #bjag4 #acdad4 ,prohibition of local approval and contribution requirements 7a7 ,in general ,paragraph 7#a7 of section #db7m71 as amended by section #acdac1 is further amended-- 7#a7 by striking clause 7ii7 of subparagraph 7,a7 and by redesignating clauses 7iii7 and 7iv7 thereof as clauses 7ii7 and 7iii71 and 7#b7 by adding at the end the following new subparagraph3 7,f7 ,local approval or contribution not taken into account ,the selection criteria under a qualified allocation plan shall not include consideration of-- 7i7 any support or opposition with respect to the project from local or elected officials1 or 7ii7 any local government contribution to the project1 except to the extent such contribution is taken into account as part of a broader consideration of the project's ability to leverage outside funding sources1 and is not prioritized over any other source of outside funding4 4 7b7 ,effective date ,the amendments made by this section shall apply to allocations of housing credit dollar amounts made after ,december #ca1 #bjag4 #acdae4 ,selection criteria under qualified allocation plans 7a7 ,in general ,subparagraph 7,c7 of section #db7m77#a7 is amended by striking and at the end of clause 7ix71 by striking the period at the end of clause 7x7 and inserting 1 and1 and by adding at the end the following new clause3 7xi7 the affordable housing needs of individuals in the ,state who are members of ,indian tribes 7as defined in section #de;,a7c77#f774 4 7b7 ,effective date ,the amendments made by this section shall apply to allocations of credits under section #db of the ,internal ,revenue ,code of #aihf made after ,december #ca1 #bjag4 #acdaf4 ,affordable housing tax credit 7a7 ,in general ,the heading of section #db is amended by striking ,low-income and inserting ,affordable4 7b7 ,conforming amendments 7#a7 ,subsection 7a7 of section #db is amended by striking low-income and inserting affordable4 7#b7 ,paragraph 7#e7 of section #ch7;b7 is amended by striking low-income and inserting affordable4 7#c7 ,the heading of subparagraph 7,d7 of section #dfi7;i77#c7 is amended by striking low-income and inserting affordable4 7#d7 ,the heading of subparagraph 7,b7 of section #dfi7;i77#f7 is amended by striking low-income and inserting affordable4 7#e7 ,paragraph 7#g7 of section #ggb7;a7 is amended by striking low-income and inserting affordable4 7#f7 ,paragraph 7#e7 of section #ggb7;d7 is amended by striking low-income and inserting affordable4 7c7 ,clerical amendment ,the item relating to section #db in the table of sections for subpart ,d of part ,,iv of subchapter ,a of chapter #a is amended to read as follows3 ,sec4 #db4 ,affordable housing credit4 4 ,,vi ,provisions related to specific entities and industries ,a ,partnership provisions #aceja4 ,treatment of gain or loss of foreign persons from sale or exchange of interests in partnerships engaged in trade or business within the ,united ,states 7a7 ,in general ,section #hfd7;c7 is amended by adding at the end the following3 7#h7 ,gain or loss of foreign persons from sale or exchange of certain partnership interests 7,a7 ,in general ,notwithstanding any other provision of this subtitle1 if a nonresident alien individual or foreign corporation owns1 directly or indirectly1 an interest in a partnership which is engaged in any trade or business within the ,united ,states1 gain or loss on the sale or exchange of all 7or any portion of7 such interest shall be treated as effectively connected with the conduct of such trade or business to the extent such gain or loss does not exceed the amount determined under subparagraph 7,b74 7,b7 ,amount treated as effectively connected ,the amount determined under this subparagraph with respect to any partnership interest sold or exchanged-- 7i7 in the case of any gain on the sale or exchange of the partnership interest1 is-- 7,i7 the portion of the partner's distributive share of the amount of gain which would have been effectively connected with the conduct of a trade or business within the ,united ,states if the partnership had sold all of its assets at their fair market value as of the date of the sale or exchange of such interest1 or 7,,ii7 zero if no gain on such deemed sale would have been so effectively connected1 and 7ii7 in the case of any loss on the sale or exchange of the partnership interest1 is-- 7,i7 the portion of the partner's distributive share of the amount of loss on the deemed sale described in clause 7i77,i7 which would have been so effectively connected1 or 7,,ii7 zero if no loss on such deemed sale would be have been so effectively connected4 ,for purposes of this subparagraph1 a partner's distributive share of gain or loss on the deemed sale shall be determined in the same manner as such partner's distributive share of the non-separately stated taxable income or loss of such partnership4 7,c7 ,coordination with ,united ,states real property interests ,if a partnership described in subparagraph 7,a7 holds any ,united ,states real property interest 7as defined in section #hig7;c77 at the time of the sale or exchange of the partnership interest1 then the gain or loss treated as effectively connected income under subparagraph 7,a7 shall be reduced by the amount so treated with respect to such ,united ,states real property interest under section #hig4 7,d7 ,sale or exchange ,for purposes of this paragraph1 an individual or corporation shall be treated as having sold or exchanged any interest in a partnership if1 under any provision of this subtitle1 gain or loss is realized from the sale or exchange of such interest4 7,e7 ,secretarial authority ,the ,secretary shall prescribe such regulations as the ,secretary determines appropriate for the application of this paragraph1 including regulations which provide that1 notwithstanding subparagraph 7,d71 this paragraph applies in a case even if gain or loss from a sale or exchange would not be realized under any other provision of this subtitle4 4 7b7 ,withholding requirements ,section #addf is amended by redesignating subsection 7f7 as subsection 7g7 and by inserting after subsection 7e7 the following3 7f7 ,special rules for withholding on sales of partnership interests 7#a7 ,in general ,except as provided in this subsection1 if any portion of the gain 7if any7 on any disposition of an interest in a partnership would be treated under section #hfd7;c77#h7 as effectively connected with the conduct of a trade or business within the ,united ,states1 the transferee shall be required to deduct and withhold a tax equal to #aj percent of the amount realized on the disposition4 7#b7 ,exception if nonforeign affidavit furnished 7,a7 ,in general ,no person shall be required to deduct and withhold any amount under paragraph 7#a7 with respect to any disposition if the transferor furnishes to the transferee an affidavit by the transferor stating1 under penalty of perjury1 the transferor's ,united ,states taxpayer identification number and that the transferor is not a foreign person4 7,b7 ,false affidavit ,subparagraph 7,a7 shall not apply to any disposition if-- 7i7 the transferee has actual knowledge that the affidavit is false1 or the transferee receives a notice 7as described in section #adde7;d77 from a transferor's agent or transferee's agent that such affidavit or statement is false1 or 7ii7 the ,secretary by regulations requires the transferee to furnish a copy of such affidavit or statement to the ,secretary and the transferee fails to furnish a copy of such affidavit or statement to the ,secretary at such time and in such manner as required by such regulations4 7,c7 ,rules for agents ,the rules of section #adde7;d7 shall apply to a transferor's agent or transferee's agent with respect to any affidavit described in subparagraph 7,a7 in the same manner as such rules apply with respect to the disposition of a ,united ,states real property interest under such section4 7#c7 ,authority of ,secretary to prescribe reduced amount ,at the request of the transferor or transferee1 the ,secretary may prescribe a reduced amount to be withheld under this section if the ,secretary determines that to substitute such reduced amount will not jeopardize the collection of the tax imposed under this title with respect to gain treated under section #hfd7;c77#h7 as effectively connected with the conduct of a trade or business with in the ,united ,states4 7#d7 ,partnership to withhold amounts not withheld by the transferee ,if a transferee fails to withhold any amount required to be withheld under paragraph 7#a71 the partnership shall be required to deduct and withhold from distributions to the transferee a tax in an amount equal to the amount the transferee failed to withhold 7plus interest under this title on such amount74 7#e7 ,definitions ,any term used in this subsection which is also used under section #adde shall have the same meaning as when used in such section4 7#f7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection1 including regulations providing for exceptions from the provisions of this subsection4 4 7c7 ,effective date ,the amendments made by this section shall apply to sales and exchanges on or after ,november #bg1 #bjag4 #acejb4 ,modify definition of substantial built-in loss in the case of transfer of partnership interest 7a7 ,in general ,paragraph 7#a7 of section #gdc7;d7 is to read as follows3 7#a7 ,in general ,for purposes of this section1 a partnership has a substantial built-in loss with respect to a transfer of an interest in the partnership if-- 7,a7 the partnership's adjusted basis in the partnership property exceeds by more than #bej1jjj the fair market value of such property1 or 7,b7 the transferee partner would be allocated a loss of more than #bej1jjj if the partnership assets were sold for cash equal to their fair market value immediately after such transfer4 4 7b7 ,effective date ,the amendments made by this section shall apply to transfers of partnership interests after ,december #ca1 #bjag4 #acejc4 ,charitable contributions and foreign taxes taken into account in determining limitation on allowance of partner's share of loss 7a7 ,in general ,subsection 7d7 of section #gjd is amended-- 7#a7 by striking ,a partner's distributive share and inserting the following3 7#a7 ,in general ,a partner's distributive share 1 7#b7 by striking ,any excess of such loss and inserting the following3 7#b7 ,carryover ,any excess of such loss 1 and 7#c7 by adding at the end the following new paragraph3 7#c7 ,special rules 7,a7 ,in general ,in determining the amount of any loss under paragraph 7#a71 there shall be taken into account the partner's distributive share of amounts described in paragraphs 7#d7 and 7#f7 of section #gjb7;a74 7,b7 ,exception ,in the case of a charitable contribution of property whose fair market value exceeds its adjusted basis1 subparagraph 7,a7 shall not apply to the extent of the partner's distributive share of such excess4 4 7b7 ,effective date ,the amendments made by this section shall apply to partnership taxable years beginning after ,december #ca1 #bjag4 ,b ,insurance reforms #aceaa4 ,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 7,a7 ,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,b7 ,section #hca7;b77#c7 is amended by striking except as provided in section #hdd1 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 #hje7;b77#b77;,a77iv7 is amended to read as follows3 7iv7 any net operating loss carryback to the taxable year under section #agb1 and 4 7#g7 ,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 7#h7 ,section #acea7;i77#c7 is amended by striking or the operations loss deduction under section #haj14 7c7 ,effective date ,the amendments made by this section shall apply to losses arising in taxable years beginning after ,december #ca1 #bjag4 #aceab4 ,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 this ,act1 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;,a71 as amended by this ,act1 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 #aceaa1 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 #aceac4 ,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 #acead4 ,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 #aceae4 ,modification of proration rules for property and casualty insurance companies 7a7 ,in general ,section #hcb7;b77#e77;,b7 is amended-- 7#a7 by striking #ae percent and inserting the applicable percentage1 and 7#b7 by inserting at the end the following new sentence3 ,for purposes of this subparagraph1 the applicable percentage is #e4be percent divided by the highest rate in effect under section #aa7;b744 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aceaf4 ,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 #aceag4 ,capitalization of certain policy acquisition expenses 7a7 ,amortization period ,section #hdh is amended by striking #abj-month each place it appears in subsections 7a77#b7 and 7b77#a7 and inserting #fjj-month4 7b7 ,determination of expenses ,paragraph 7#a7 of section #hdh7;c7 is amended-- 7#a7 by striking #a4ge percent in subparagraph 7,a7 and inserting #c4ag percent1 7#b7 by striking #b4je percent in subparagraph 7,b7 and inserting #c4gb percent1 and 7#c7 by striking #g4g percent in subparagraph 7,c7 and inserting #ac4ig percent4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #aceah4 ,tax reporting for life settlement transactions 7a7 ,in general ,subpart ,b of part ,,iii of subchapter ,a of chapter #fa1 as amended by section #accje1 is amended by adding at the end the following new section3 #fjej,y4 ,returns relating to certain life insurance contract transactions 7a7 ,requirement of reporting of certain payments 7#a7 ,in general ,every person who acquires a life insurance contract or any interest in a life insurance contract in a reportable policy sale during any taxable year shall make a return for such taxable year 7at such time and in such manner as the ,secretary shall prescribe7 setting forth-- 7,a7 the name1 address1 and ,,tin of such person1 7,b7 the name1 address1 and ,,tin of each recipient of payment in the reportable policy sale1 7,c7 the date of such sale1 7,d7 the name of the issuer of the life insurance contract sold and the policy number of such contract1 and 7,e7 the amount of each payment4 7#b7 ,statement to be furnished to persons with respect to whom information is required ,every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing-- 7,a7 the name1 address1 and phone number of the information contact of the person required to make such return1 and 7,b7 the information required to be shown on such return with respect to such person1 except that in the case of an issuer of a life insurance contract1 such statement is not required to include the information specified in paragraph 7#a77;,e74 7b7 ,requirement of reporting of seller's basis in life insurance contracts 7#a7 ,in general ,upon receipt of the statement required under subsection 7a77#b7 or upon notice of a transfer of a life insurance contract to a foreign person1 each issuer of a life insurance contract shall make a return 7at such time and in such manner as the ,secretary shall prescribe7 setting forth-- 7,a7 the name1 address1 and ,,tin of the seller who transfers any interest in such contract in such sale1 7,b7 the investment in the contract 7as defined in section #gb7;e77#f77 with respect to such seller1 and 7,c7 the policy number of such contract4 7#b7 ,statement to be furnished to persons with respect to whom information is required ,every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing-- 7,a7 the name1 address1 and phone number of the information contact of the person required to make such return1 and 7,b7 the information required to be shown on such return with respect to each seller whose name is required to be set forth in such return4 7c7 ,requirement of reporting with respect to reportable death benefits 7#a7 ,in general ,every person who makes a payment of reportable death benefits during any taxable year shall make a return for such taxable year 7at such time and in such manner as the ,secretary shall prescribe7 setting forth-- 7,a7 the name1 address1 and ,,tin of the person making such payment1 7,b7 the name1 address1 and ,,tin of each recipient of such payment1 7,c7 the date of each such payment1 and 7,d7 the gross amount of each such payment4 7,e7 such person's estimate of the investment in the contract 7as defined in section #gb7;e77#f77 with respect to the buyer4 7#b7 ,statement to be furnished to persons with respect to whom information is required ,every person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such return a written statement showing-- 7,a7 the name1 address1 and phone number of the information contact of the person required to make such return1 and 7,b7 the information required to be shown on such return with respect to each recipient of payment whose name is required to be set forth in such return4 7d7 ,definitions ,for purposes of this section3 7#a7 ,payment ,the term payment means1 with respect to any reportable policy sale1 the amount of cash and the fair market value of any consideration transferred in the sale4 7#b7 ,reportable policy sale ,the term reportable policy sale has the meaning given such term in section #aja7;a77#c77;,b74 7#c7 ,issuer ,the term issuer means any life insurance company that bears the risk with respect to a life insurance contract on the date any return or statement is required to be made under this section4 7#d7 ,reportable death benefits ,the term reportable death benefits means amounts paid by reason of the death of the insured under a life insurance contract that has been transferred in a reportable policy sale4 4 7b7 ,clerical amendment ,the table of sections for subpart ,b of part ,,iii of subchapter ,a of chapter #fa1 as amended by section #accje1 is amended by inserting after the item relating to section #fjej,x the following new item3 ,sec4 #fjej,y4 ,returns relating to certain life insurance contract transactions4 4 7c7 ,conforming amendments 7#a7 ,subsection 7d7 of section #fgbd is amended-- 7,a7 by striking or at the end of clause 7xxiv7 of paragraph 7#a77;,b71 by striking and at the end of clause 7xxv7 of such paragraph and inserting or1 and by inserting after such clause 7xxv7 the following new clause3 7xxvi7 section #fjej,y 7relating to returns relating to certain life insurance contract transactions71 and 1 and 7,b7 by striking or at the end of subparagraph 7,,hh7 of paragraph 7#b71 by striking the period at the end of subparagraph 7,,ii7 of such paragraph and inserting 1 or1 and by inserting after such subparagraph 7,,ii7 the following new subparagraph3 7,,jj7 subsection 7a77#b71 7b77#b71 or 7c77#b7 of section #fjej,y 7relating to returns relating to certain life insurance contract transactions74 4 7#b7 ,section #fjdg is amended-- 7,a7 by redesignating subsection 7g7 as subsection 7h71 7,b7 by inserting after subsection 7f7 the following new subsection3 7g7 ,information relating to life insurance contract transactions ,this section shall not apply to any information which is required to be reported under section #fjej,y4 1 and 7,c7 by adding at the end of subsection 7h71 as so redesignated1 the following new paragraph3 7#d7 ,for provisions requiring reporting of information relating to certain life insurance contract transactions1 see section #fjej,y4 4 7d7 ,effective date ,the amendments made by this section shall apply to-- 7#a7 reportable policy sales 7as defined in section #fjej,y7d77#b7 of the ,internal ,revenue ,code of #aihf 7as added by subsection 7a77 after ,december #ca1 #bjag1 and 7#b7 reportable death benefits 7as defined in section #fjej,y7d77#d7 of such ,code 7as added by subsection 7a77 paid after ,december #ca1 #bjag4 #aceai4 ,clarification of tax basis of life insurance contracts 7a7 ,clarification with respect to adjustments ,paragraph 7#a7 of section #ajaf7;a7 is amended by striking subparagraph 7,a7 and all that follows and inserting the following3 7,a7 for-- 7i7 taxes or other carrying charges described in section #bff2 or 7ii7 expenditures described in section #agc 7relating to circulation expenditures71 for which deductions have been taken by the taxpayer in determining taxable income for the taxable year or prior taxable years2 or 7,b7 for mortality1 expense1 or other reasonable charges incurred under an annuity or life insurance contract2 4 7b7 ,effective date ,the amendment made by this section shall apply to transactions entered into after ,august #be1 #bjji4 #acebj4 ,exception to transfer for valuable consideration rules 7a7 ,in general ,subsection 7a7 of section #aja is amended by inserting after paragraph 7#b7 the following new paragraph3 7#c7 ,exception to valuable consideration rules for commercial transfers 7,a7 ,in general ,the second sentence of paragraph 7#b7 shall not apply in the case of a transfer of a life insurance contract1 or any interest therein1 which is a reportable policy sale4 7,b7 ,reportable policy sale ,for purposes of this paragraph1 the term reportable policy sale means the acquisition of an interest in a life insurance contract1 directly or indirectly1 if the acquirer has no substantial family1 business1 or financial relationship with the insured apart from the acquirer's interest in such life insurance contract4 ,for purposes of the preceding sentence1 the term indirectly applies to the acquisition of an interest in a partnership1 trust1 or other entity that holds an interest in the life insurance contract4 4 7b7 ,conforming amendment ,paragraph 7#a7 of section #aja7;a7 is amended by striking paragraph 7#b7 and inserting paragraphs 7#b7 and 7#c74 7c7 ,effective date ,the amendments made by this section shall apply to transfers after ,december #ca1 #bjag4 ,c ,banks and ,financial ,instruments #aceca4 ,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 7i7 ,in general ,for purposes of this paragraph1 the term expanded affiliated group means an affiliated group as defined in section #aejd7;a71 determined-- 7,i7 by substituting more than #ej percent for at least #hj percent each place it appears1 and 7,,ii7 without regard to paragraphs 7#b7 and 7#c7 of section #aejd7;b74 7ii7 ,control of non-corporate entities ,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 clause74 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acecb4 ,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 #acecc4 ,cost basis of specified securities determined without regard to identification 7a7 ,in general ,section #ajab is amended by adding at the end the following new subsection3 7e7 ,cost basis of specified securities determined without regard to identification 7#a7 ,in general ,unless the ,secretary permits the use of an average basis method for determining cost1 in the case of the sale1 exchange1 or other disposition of a specified security 7within the meaning of section #fjde7;g77#c77;,b771 the basis 7and holding period7 of such security shall be determined on a first-in first-out basis4 7#b7 ,exception ,in the case of a sale1 exchange1 or other disposition of a specified security by a regulated investment company 7as defined in section #hea7;a771 paragraph 7#a7 shall not apply4 4 7b7 ,conforming amendments 7#a7 ,section #ajab7;c77#a7 is amended by striking the conventions prescribed by regulations under this section and inserting the method applicable for determining the cost of such security4 7#b7 ,section #ajab7;c77#b77;,a7 is amended by inserting 7as in effect prior to the enactment of the ,tax ,cuts and ,jobs ,act7 after this section4 7#c7 ,section #fjde7;g77#b77;,b77i77,i7 is amended by striking unless the customer notifies the broker by means of making an adequate identification of the stock sold or transferred4 7c7 ,effective date ,the amendments made by this section shall apply to sales1 exchanges1 and other dispositions after ,december #ca1 #bjag4 ,d ,s ,corporations #aceda4 ,expansion of qualifying beneficiaries of an electing small business trust 7a7 ,no look-,through for eligibility purposes ,section #acfa7;c77#b77;,b77v7 is amended by adding at the end the following new sentence3 ,this clause shall not apply for purposes of subsection 7b77#a77;,c744 7b7 ,effective date ,the amendment made by this section shall take effect on ,january #a1 #bjah4 #acedb4 ,charitable contribution deduction for electing small business trusts 7a7 ,in general ,section #fda7;c77#b7 is amended by inserting after subparagraph 7,d7 the following new subparagraph3 7,e7 7i7 ,section #fdb7;c7 shall not apply4 7ii7 ,for purposes of section #agj7;b77#a77;,g71 adjusted gross income shall be computed in the same manner as in the case of an individual1 except that the deductions for costs which are paid or incurred in connection with the administration of the trust and which would not have been incurred if the property were not held in such trust shall be treated as allowable in arriving at adjusted gross income4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,,vii ,employment ,a ,compensation #acfja4 ,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 ,paragraph 7#d7 of section #afb7m7 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 ,modification of definition of covered employees ,paragraph 7#c7 of section #afb7m7 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 any individual described in subparagraph 7,a771 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 4 7c7 ,expansion of applicable employer 7#a7 ,in general ,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 7#b7 ,conforming amendment ,section #afb7m77#c71 as amended by subsection 7b71 is amended by adding at the end the following flush sentence3 ,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 ,paragraph 7#d7 of section #afb7m71 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 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7#b7 ,exception for binding contracts ,the amendments made by this section shall not apply to remuneration which is pursuant to a written binding contract which was in effect on ,november #b1 #bjag1 and which was not modified in any material respect on or after such date4 #acfjb4 ,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 ,for purposes of the preceding sentence1 remuneration shall be treated as paid when there is no substantial risk of forfeiture of the rights to such remuneration4 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 which 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;,a7c77 and shall include amounts required to be included in gross income under section #deg7;f74 7#d7 ,remuneration from related organizations 7,a7 ,in general ,remuneration of a covered employee by an applicable tax-exempt organization shall include any remuneration paid with respect to employment of such employee by any related person or governmental 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 which control the organization1 7iii7 is a supported organization 7as defined in section #eji7;f77#c77 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 which is a voluntary employees' beneficiary association described in section #eja7;c77#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 of 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 tax under this section1 including regulations preventing employees from being misclassified as contractors or from being compensated through a pass-through or other entity to avoid such tax4 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 #acfjc4 ,treatment of qualified equity grants 7a7 ,in general ,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 subtitle-- 7,a7 ,timing of inclusion ,if qualified stock is transferred to a qualified employee who makes an election with respect to such stock under this subsection1 subsection 7a7 shall be applied by including the amount determined under such subsection with respect to such stock in income of the employee in the taxable year determined under subparagraph 7,b7 in lieu of the taxable year described in subsection 7a74 7,b7 ,taxable year determined ,the taxable year determined under this subparagraph is the taxable year of the employee which includes the earliest of-- 7i7 the first date such qualified stock becomes transferable 7including1 solely for purposes of this clause1 becoming 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 provides7 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 granted 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 made in a similar manner as 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 are 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 was for any of the #aj preceding taxable years one of the #d highest compensated officers of such corporation1 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 date 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 date 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 subparagraph 7,b77iii7 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 requires for purposes of administering this paragraph4 7#e7 ,controlled groups ,for purposes of this subsection1 all persons treated as a single employer under section #dad7;b7 shall be treated as #a corporation4 7#f7 ,notice requirement ,any corporation which 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 be eligible to 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 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#b77 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 #dbc is amended-- 7i7 by adding at the end of subsection 7a7 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 1 and 7ii7 in subsection 7b77#e71 by striking and before the plan and by inserting 1 and the rules of section #hc7;i7 shall apply in determining which employees have a right to make an election under such section before the semicolon at the end4 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 includible in gross income under subparagraph 7,a7 of section #hc7;i77#a7 with respect to an event described in subparagraph 7,b7 of such section which occurs in such calendar year1 and 7#af7 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 7p7 ,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 issues 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 #acfjd4 ,increase in excise tax rate for stock compensation of insiders in expatriated corporations 7a7 ,in general ,section #dihe7;a77#a7 is amended by striking section #a7;h77#a77;,c7 and inserting section #a7;h77#a77;,d74 7b7 ,effective date ,the amendment made by this section shall apply to corporations first becoming expatriated corporations 7as defined in section #dihe of the ,internal ,revenue ,code of #aihf7 after the date of enactment of this ,act4 ,b ,retirement plans #acfaa4 ,conformity of contribution limits for employer-sponsored retirement plans 7a7 #djc7;b7 plans 7#a7 ,elimination of special catch-up rule ,subsection 7g7 of section #djb is amended by striking paragraph 7#g7 and by redesignating paragraph 7#h7 as paragraph 7#g74 7#b7 ,elimination of post termination non-elective contributions ,subsection 7b7 of section #djc is amended-- 7,a7 in paragraph 7#c71 by striking for the most recent period and all that follows through more than five years1 and 7,b7 by striking paragraph 7#d74 7#c7 ,elimination of separate #dae7;c7 limits ,paragraph 7#d7 of section #dae7k7 is amended by striking each employer with respect to which the participant has the control required and inserting the employer and each employer which is part of the same controlled group or under common control4 7b7 #deg7;b7 plans 7#a7 ,elimination of separate deferral limit ,paragraph 7#c7 of section #djb7;g7 is amended by striking and at the end of subparagraph 7,c71 by striking the period at the end of subparagraph 7,d7 and inserting 1 and1 and by inserting after subparagraph 7,d7 the following new subparagraph3 7,e7 any amount deferred under an eligible deferred compensation plan 7as defined in section #deg7;b77 of an eligible employer described in section #deg7;e77#a77;,a74 4 7#b7 ,taken into account under limitation for defined contribution plans 7,a7 ,in general ,paragraph 7#b7 of section #dae7;a7 is amended-- 7i7 by striking or at the end of subparagraph 7,b71 by inserting or at the end of subparagraph 7,c71 and by inserting after subparagraph 7,c7 the following new subparagraph3 7,d7 an eligible deferred compensation plan 7as defined in section #deg7;b77 of an eligible employer described in section #deg7;e77#a77;,a71 1 and 7ii7 by striking or #djh7k7 in the flush language and inserting #djh7k71 or #deg7;b74 7,b7 ,definition ,paragraph 7#a7 of section #dae7k7 is amended by striking or at the end of subparagraph 7,c71 by striking the period at the end of subparagraph 7,d7 and inserting 1 or1 and by adding at the end the following new subparagraph3 7,e7 an eligible deferred compensation plan 7as defined in section #deg7;b77 of an eligible employer described in section #deg7;e77#a77;,a74 4 7#c7 ,elimination of special catch-up rule ,paragraph 7#c7 of section #deg7;b7 is amended by inserting in the case of an eligible employer described in subsection 7e77#a77;,b71 before which4 7c7 ,conforming amendments 7#a7 ,section #be;,b7d77#a77;,b7 is amended-- 7,a7 by striking clause 7ii71 and 7,b7 by striking the amount of-- and all that follows through any elective deferrals and inserting the amount of any elective deferrals4 7#b7 ,section #djb;,a7e77#b7 is amended by striking means-- and all that follows and inserting means any elective deferral described in subparagraph 7,a71 7,c71 or 7,e7 of section #djb7;g77#c74 7#c7 ,section #deg7;e7 is amended by striking paragraph 7#ah74 7#d7 ,section #dad7u77#b77;,c7 is amended by inserting of an eligible employer described in section #deg7;e77#a77;,b7 after 7as defined in section #deg7;b774 7#e7 ,section #dad7v77#b77;,d7 is amended-- 7,a7 by striking clauses 7i71 7ii71 and 7iv7 of1 and 7,b7 by striking 1 and plans described in clause 7iii7 and all that follows and inserting a period4 7#f7 ,section #dad7v77#c77;,a77i7 is amended by striking 7determined without regard to section #deg7;b77#c774 7#g7 ,section #dad7v77#f77;,b7 is amended by striking subsection 7u77#b77;,c7 and inserting section #djb7;g77#c74 7#h7 ,section #dad7v77#f7 is amended by striking subparagraph 7,c74 7d7 ,effective date ,the amendments made by this section shall apply to plan years and taxable years beginning after ,december #ca1 #bjag4 #acfab4 ,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 #acfac4 ,modification of rules applicable to length of service award plans 7a7 ,maximum deferral amount ,clause 7ii7 of section #deg7;e77#aa77;,b7 is amended by striking #c1jjj and inserting #f1jjj4 7b7 ,cost of living adjustment ,subparagraph 7,b7 of section #deg7;e77#aa7 is amended by adding at the end the following3 7iii7 ,cost of living adjustment ,in the case of taxable years beginning after ,december #ca1 #bjag1 the ,secretary shall adjust the #f1jjj amount under clause 7ii7 at the same time and in the same manner as under section #dae7;d71 except that the base period shall be the calendar quarter beginning ,july #a1 #bjaf1 and any increase under this paragraph that is not a multiple of #ejj shall be rounded to the next lowest multiple of #ejj4 4 7c7 ,application of limitation on accruals ,subparagraph 7,b7 of section #deg7;e77#aa71 as amended by subsection 7b71 is amended by adding at the end the following3 7iv7 ,special rule for application of limitation on accruals for certain plans ,in the case of a plan described in subparagraph 7,a77ii7 which is a defined benefit plan 7as defined in section #dad7;j771 the limitation under clause 7ii7 shall apply to the actuarial present value of the aggregate amount of length of service awards accruing with respect to any year of service4 ,such actuarial present value with respect to any year shall be calculated using reasonable actuarial assumptions and methods1 assuming payment will be made under the most valuable form of payment under the plan with payment commencing at the later of the earliest age at which unreduced benefits are payable under the plan or the participant's age at the time of the calculation4 4 7d7 ,effective date ,the amendments made by this ,act shall apply to taxable years beginning after ,december #ca1 #bjag4 #acfad4 ,extended rollover period for plan loan offset amounts 7a7 ,in general ,paragraph 7#c7 of section #djb7;c7 is amended by redesignating subparagraph 7,b7 as subparagraph 7,c7 and by inserting after subparagraph 7,a7 the following new subparagraph3 7,b7 ,rollover of certain plan loan offset amounts 7i7 ,in general ,in the case of an eligible rollover distribution of a qualified plan loan offset amount1 the requirements of subparagraph 7,a7 shall be treated as met if such transfer occurs on or before 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 severance from employment of the participant4 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 plan loan offset amounts which are treated as distributed in taxable years beginning after ,december #ca1 #bjag4 ,,viii ,exempt ,organizations #acgja4 ,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 #difh4 ,excise tax based on investment income of private colleges and universities4 #difh4 ,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;,a7f77#b77-- 7,a7 which had at least #ejj tuition-paying students during the preceding taxable year1 7,b7 which is not described in the first sentence of section #eaa7;a77#b77;,b7 7relating to ,state colleges and universities71 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 assets and net investment income of any related organization with respect to an educational institution shall be treated as assets and net investment income1 respectively1 of the educational institution1 except that-- 7,a7 no such amount shall be taken into account with respect to more than #a educational institution1 and 7,b7 unless such organization is controlled by such institution or is described in section #eji7;a77#c7 with respect to such institution for the taxable year1 assets and net investment income which are not intended or available for the use or benefit of the educational institution shall not be taken into account4 7#b7 ,related organization ,for purposes of this subsection1 the term related organization means1 with respect to an educational institution1 any organization which-- 7,a7 controls1 or is controlled by1 such institution1 7,b7 is controlled by #a or more persons which also 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 #acgjb4 ,name and logo royalties treated as unrelated business taxable income 7a7 ,in general ,section #eac is amended by adding at the end the following new subsection3 7k7 ,name and logo royalties ,any sale or licensing by an organization of any name or logo of the organization 7including any trademark or copyright relating to such name or logo7 shall be treated as an unrelated trade or business regularly carried on by such organization4 4 7b7 ,calculation of unrelated business taxable income ,subsection 7b7 of section #eab is amended by adding at the end the following new paragraph3 7#bj7 ,special rule for name and logo royalties ,notwithstanding paragraph 7#a71 7#b71 7#c71 or 7#e71 any income derived from any sale or licensing described in section #eac7k7 shall be included as an item of gross income derived from an unrelated trade or business4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acgjc4 ,unrelated business taxable income separately computed for each trade or business activity 7a7 ,in general ,subsection 7a7 of section #eab is amended by adding at the end the following new paragraph3 7#f7 ,special rule for organization with more than #a unrelated trade or business ,in the case of any organization with more than #a unrelated trade or business-- 7,a7 unrelated business taxable income1 including for purposes of determining any net operating loss deduction1 shall be computed separately with respect to each such trade or business and without regard to subsection 7b77#ab71 7,b7 the unrelated business taxable income of such organization shall be the sum of the unrelated business taxable income so computed with respect to each such trade or business1 less a specific deduction under subsection 7b77#ab71 and 7,c7 for purposes of subparagraph 7,b71 unrelated business taxable income with respect to any such trade or business shall not be less than zero4 4 7b7 ,effective date 7#a7 ,in general ,except to the extent provided in paragraph 7#b71 the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 7#b7 ,carryovers of net operating losses ,if any net operating loss arising in a taxable year beginning before ,january #a1 #bjah1 is carried over to a taxable year beginning on or after such date-- 7,a7 subparagraph 7,a7 of section #eab7;a77#f7 of the ,internal ,revenue ,code of #aihf1 as added by this ,act1 shall not apply to such net operating loss1 and 7,b7 the unrelated business taxable income of the organization1 after the application of subparagraph 7,b7 of such section1 shall be reduced by the amount of such net operating loss4 #acgjd4 ,repeal of tax-exempt status for professional sports leagues 7a7 ,in general ,paragraph 7#f7 of section #eja7;c7 is amended-- 7#a7 by striking 1 boards of trade1 or professional and all that follows through players7 and inserting 1 or boards of trade1 and 7#b7 by adding at the end the following3 ,this paragraph shall not apply to any professional sports league 7whether or not administering a pension fund for players744 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acgje4 ,modification of taxes on excess benefit transactions 7a7 ,organization level tax ,subsection 7a7 of section #dieh is amended by adding at the end the following new paragraph3 7#c7 ,on the organization ,in any case in which a tax is imposed by paragraph 7#a71 there is hereby imposed on the organization a tax equal to #aj percent of the excess benefit1 unless the participation of the organization in the excess benefit transaction is not willful and is due to reasonable cause4 4 7b7 ,minimum standards of organization due diligence ,subsection 7d7 of section #dieh is amended by adding at the end the following new paragraph3 7#c7 ,minimum standards of organization due diligence 7,a7 ,in general ,subsection 7a77#c7 shall not apply to a transaction1 if-- 7i7 the organization establishes that the minimum standards of due diligence described in subparagraph 7,b7 were met with respect to the transaction1 or 7ii7 the organization establishes to the satisfaction of the ,secretary that other reasonable procedures were used to ensure that no excess benefit was provided4 7,b7 ,minimum standards ,an organization shall be treated as satisfying the minimum standards of due diligence described in this subparagraph with respect to any transaction1 if-- 7i7 the transaction was approved in advance by an authorized body of the organization composed entirely of individuals who did not have a conflict of interest with respect to the transaction1 7ii7 the authorized body obtained and relied upon appropriate data as to comparability prior to approval of the transaction1 and 7iii7 the authorized body adequately and concurrently documented the basis for approving the transaction4 7,c7 ,no presumption as to reasonableness ,meeting the requirements of clause 7i7 or 7ii7 of subparagraph 7,a7 with respect to a transaction shall not give rise to a presumption of reasonableness for purposes of the taxes imposed by paragraphs 7#a7 of 7#b7 of subsection 7a7 and shall not1 by itself1 support a conclusion that a manager did not act knowingly for purposes of subsection 7a77#b7 or that the organization did not act wilfully or without reasonable cause for purposes of subsection 7a77#c74 4 7c7 ,repeal of exception for manager reliance on professional advice ,section #dieh is amended by adding at the end the following new subsection3 7g7 ,no safe harbor for reliance on professional advice ,an organization manager's reliance on a written opinion of a professional with respect to elements of a transaction within the professional's expertise shall not1 by itself1 preclude the manager from being treated as participating in the transaction knowingly4 4 7d7 ,athletic coaches and investment managers treated as disqualified persons 7#a7 ,athletic coaches 7,a7 ,in general ,paragraph 7#a7 of section #dieh7;f7 is amended by striking and at the end of subparagraph 7,e71 by striking the period at the end of subparagraph 7,f7 and inserting 1 and1 and by adding at the end the following new subparagraph3 7,g7 which involves an eligible educational institution 7as defined in section #be;,a7f77#b771 any person who performs services as an athletic coach for the organization4 4 7,b7 ,family members ,subparagraph 7,b7 of section #dieh7;f77#a7 is amended by inserting or 7,g7 after subparagraph 7,a74 7#b7 ,investment advisors 7,a7 ,in general ,subparagraph 7,f7 of section #dieh7;f77#a7 is amended-- 7i7 by striking which involves a sponsoring organization 7as defined in section #diff7;d77#a7711 and 7ii7 by striking such sponsoring organization 7as so defined7 and inserting the organization4 7,b7 ,investment advisor definition ,subparagraph 7,b7 of section #dieh7;f77#h7 is amended to read as follows3 7,b7 ,investment advisor defined ,for purposes of subparagraph 7,a71 the term investment advisor means-- 7i7 with respect to any organization1 any person who is compensated by such organization and is primarily responsible for managing the investment of1 or providing investment advice with respect to1 assets of such organization1 and 7ii7 with respect to any sponsoring organization 7as defined in section #diff7;d77#a771 any person 7other than an employee of such organization7 compensated by such organization for managing the investment of1 or providing investment advice with respect to1 assets maintained in donor advised funds 7as defined in section #diff7;d77#b77 owned by such organization4 4 7e7 ,application to unions and trade associations ,paragraph 7#a7 of section #dieh7;e7 is amended by inserting 7#e71 7#f71 after 7#d714 7f7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #acgjf4 ,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 meets the requirements of paragraphs 7#b71 7#c71 and 7#d7 for the taxable year4 7#b7 ,ownership ,the 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 by means other than by purchase4 7#c7 ,all profits to charity 7,a7 ,in general ,the requirements of this paragraph are 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 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 foundation or family member 7as determined under section #dieh7;f77#d77 of such a contributor 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 persons who are not-- 7i7 directors or officers of the business enterprise1 or 7ii7 family members 7as so determined7 of a substantial contributor 7as so defined7 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 to any family member of such a 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 #acgjg4 ,repeal of deduction for amounts paid in exchange for college athletic event seating rights 7a7 ,in general ,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 7b7 ,effective date ,the amendment made by this section shall apply to contributions made in taxable years beginning after ,december #ca1 #bjag4 #acgjh4 ,repeal of substantiation exception in case of contributions reported by donee 7a7 ,in general ,section #agj7;f77#h7 is amended by striking subparagraph 7,d7 and by redesignating subparagraph 7,e7 as subparagraph 7,d74 7b7 ,effective date ,the amendments made by this section shall apply to contributions made in taxable years beginning after ,december #ca1 #bjaf4 ,,ix ,other provisions ,a ,craft ,beverage ,modernization and ,tax ,reform #achja4 ,rule of construction ,nothing in this subpart1 the amendments made by this subpart1 or any regulation promulgated under this subpart or the amendments made by this subpart1 shall be construed to preempt1 supersede1 or otherwise limit or restrict any ,state1 local1 or tribal law that prohibits or regulates the production or sale of distilled spirits1 wine1 or malt beverages4 #achjb4 ,production period for beer1 wine1 and distilled spirits 7a7 ,in general ,section #bfc;,a7f7 is amended-- 7#a7 by redesignating paragraph 7#d7 as paragraph 7#e71 and 7#b7 by inserting after paragraph 7#c7 the following new paragraph3 7#d7 ,exemption for aging process of beer1 wine1 and distilled spirits 7,a7 ,in general ,for purposes of this subsection1 the production period shall not include the aging period for-- 7i7 beer 7as defined in section #ejeb7;a771 7ii7 wine 7as described in section #ejda7;a771 or 7iii7 distilled spirits 7as defined in section #ejjb7;a77#h771 except such spirits that are unfit for use for beverage purposes4 7,b7 ,termination ,this paragraph shall not apply to interest costs paid or accrued after ,december #ca1 #bjai4 4 7b7 ,conforming amendment ,paragraph 7#e77;,b77ii7 of section #bfc;,a7f71 as redesignated by this section1 is amended by inserting except as provided in paragraph 7#d71 before ending on the date4 7c7 ,effective date ,the amendments made by this section shall apply to interest costs paid or accrued in calendar years beginning after ,december #ca1 #bjag4 #achjc4 ,reduced rate of excise tax on beer 7a7 ,in general ,paragraph 7#a7 of section #ejea7;a7 is amended to read as follows3 7#a7 ,in general 7,a7 ,imposition of tax ,a tax is hereby imposed on all beer brewed or produced1 and removed for consumption or sale1 within the ,united ,states1 or imported into the ,united ,states4 ,except as provided in paragraph 7#b71 the rate of such tax shall be the amount determined under this paragraph4 7,b7 ,rate ,except as provided in subparagraph 7,b71 the rate of tax shall be #ah for per barrel4 7,c7 ,special rule ,in the case of beer removed after ,december #ca1 #bjag1 and before ,january #a1 #bjbj1 the rate of tax shall be-- 7i7 #af on the first #f1jjj1jjj barrels of beer-- 7,i7 brewed by the brewer and removed during the calendar year for consumption or sale1 or 7,,ii7 imported by the importer into the ,united ,states during the calendar year1 and 7ii7 #ah on any barrels of beer to which clause 7i7 does not apply4 7,d7 ,barrel ,for purposes of this section1 a barrel shall contain not more than #ca gallons of beer1 and any tax imposed under this section shall be applied at a like rate for any other quantity or for fractional parts of a barrel4 4 7b7 ,reduced rate for certain domestic production ,subparagraph 7,a7 of section #ejea7;a77#b7 is amended-- 7#a7 in the heading1 by striking #g a barrel1 and 7#b7 by inserting 7#c4ej in the case of beer removed after ,december #ca1 #bjag1 and before ,january #a1 #bjbj7 after #g4 7c7 ,application of reduced tax rate for foreign manufacturers and importers ,subsection 7a7 of section #ejea is amended-- 7#a7 in subparagraph 7,c77ii7 of paragraph 7#a71 as amended by subsection 7a71 by inserting but only if the importer is an electing importer under paragraph 7#d7 and the barrels have been assigned to the importer pursuant to such paragraph after during the calendar year1 and 7#b7 by adding at the end the following new paragraph3 7#d7 ,reduced tax rate for foreign manufacturers and importers 7,a7 ,in general ,in the case of any barrels of beer which have been brewed or produced outside of the ,united ,states and imported into the ,united ,states1 the rate of tax applicable under clause 7i7 of paragraph 7#a77;,c7 7referred to in this paragraph as the reduced tax rate7 may be assigned by the brewer 7provided that the brewer makes an election described in subparagraph 7,b77ii77 to any electing importer of such barrels pursuant to the requirements established by the ,secretary under subparagraph 7,b74 7,b7 ,assignment ,the ,secretary shall1 through such rules1 regulations1 and procedures as are determined appropriate1 establish procedures for assignment of the reduced tax rate provided under this paragraph1 which shall include-- 7i7 a limitation to ensure that the number of barrels of beer for which the reduced tax rate has been assigned by a brewer-- 7,i7 to any importer does not exceed the number of barrels of beer brewed or produced by such brewer during the calendar year which were imported into the ,united ,states by such importer1 and 7,,ii7 to all importers does not exceed the #f1jjj1jjj barrels to which the reduced tax rate applies1 7ii7 procedures that allow the election of a brewer to assign and an importer to receive the reduced tax rate provided under this paragraph1 7iii7 requirements that the brewer provide any information as the ,secretary determines necessary and appropriate for purposes of carrying out this paragraph1 and 7iv7 procedures that allow for revocation of eligibility of the brewer and the importer for the reduced tax rate provided under this paragraph in the case of any erroneous or fraudulent information provided under clause 7iii7 which the ,secretary deems to be material to qualifying for such reduced rate4 7,c7 ,controlled group ,for purposes of this section1 any importer making an election described in subparagraph 7,b77ii7 shall be deemed to be a member of the controlled group of the brewer1 as described under paragraph 7#e74 4 7d7 ,controlled group and single taxpayer rules ,subsection 7a7 of section #ejea1 as amended by this section1 is amended-- 7#a7 in paragraph 7#b7-- 7,a7 by striking subparagraph 7,b71 and 7,b7 by redesignating subparagraph 7,c7 as subparagraph 7,b71 and 7#b7 by adding at the end the following new paragraph3 7#e7 ,controlled group and single taxpayer rules 7,a7 ,in general ,except as provided in subparagraph 7,b71 in the case of a controlled group1 the #f1jjj1jjj barrel quantity specified in paragraph 7#a77;,c77i7 and the #b1jjj1jjj barrel quantity specified in paragraph 7#b77;,a7 shall be applied to the controlled group1 and the #f1jjj1jjj barrel quantity specified in paragraph 7#a77;,c77i7 and the #fj1jjj barrel quantity specified in paragraph 7#b77;,a7 shall be apportioned among the brewers who are members of such group in such manner as the ,secretary or their delegate shall by regulations prescribe4 ,for purposes of the preceding sentence1 the term controlled group has the meaning assigned to it by subsection 7a7 of section #aefc1 except that for such purposes the phrase more than #ej percent shall be substituted for the phrase at least #hj percent in each place it appears in such subsection4 ,under regulations prescribed by the ,secretary1 principles similar to the principles of the preceding two sentences shall be applied to a group of brewers under common control where one or more of the brewers is not a corporation4 7,b7 ,foreign manufacturers and importers ,for purposes of paragraph 7#d71 in the case of a controlled group1 the #f1jjj1jjj barrel quantity specified in paragraph 7#a77;,c77i7 shall be applied to the controlled group and apportioned among the members of such group in such manner as the ,secretary shall by regulations prescribe4 ,for purposes of the preceding sentence1 the term controlled group has the meaning given such term under subparagraph 7,a74 ,under regulations prescribed by the ,secretary1 principles similar to the principles of the preceding two sentences shall be applied to a group of brewers under common control where one or more of the brewers is not a corporation4 7,c7 ,single taxpayer ,pursuant to rules issued by the ,secretary1 two or more entities 7whether or not under common control7 that produce beer marketed under a similar brand1 license1 franchise1 or other arrangement shall be treated as a single taxpayer for purposes of the application of this subsection4 4 7e7 ,effective date ,the amendments made by this section shall apply to beer removed after ,december #ca1 #bjag4 #achjd4 ,simplification of rules regarding records1 statements1 and returns 7a7 ,in general ,subsection 7a7 of section #eeee is amended by adding at the end the following3 ,for calendar quarters beginning after ,december #ca1 #bjag1 and before ,january #a1 #bjbj1 the ,secretary shall permit a person to employ a unified system for any records1 statements1 and returns required to be kept1 rendered1 or made under this section for any beer produced in the brewery for which the tax imposed by section #ejea has been determined1 including any beer which has been removed for consumption on the premises of the brewery44 7b7 ,effective date ,the amendments made by this section shall apply to any calendar quarters beginning after ,december #ca1 #bjag4 #achje4 ,transfer of beer between bonded facilities 7a7 ,in general ,section #edad is amended-- 7#a7 by striking ,beer may be removed and inserting 7a7 ,in general4--,beer may be removed1 and 7#b7 by adding at the end the following3 7b7 ,transfer of beer between bonded facilities 7#a7 ,in general ,beer may be removed from one brewery to another bonded brewery1 without payment of tax1 and may be mingled with beer at the receiving brewery1 subject to such conditions1 including payment of the tax1 and in such containers1 as the ,secretary by regulations shall prescribe1 which shall include-- 7,a7 any removal from one brewery to another brewery belonging to the same brewer1 7,b7 any removal from a brewery owned by one corporation to a brewery owned by another corporation when-- 7i7 one such corporation owns the controlling interest in the other such corporation1 or 7ii7 the controlling interest in each such corporation is owned by the same person or persons1 and 7,c7 any removal from one brewery to another brewery when-- 7i7 the proprietors of transferring and receiving premises are independent of each other and neither has a proprietary interest1 directly or indirectly1 in the business of the other1 and 7ii7 the transferor has divested itself of all interest in the beer so transferred and the transferee has accepted responsibility for payment of the tax4 7#b7 ,transfer of liability for tax ,for purposes of paragraph 7#a77;,c71 such relief from liability shall be effective from the time of removal from the transferor's bonded premises1 or from the time of divestment of interest1 whichever is later4 7#c7 ,termination ,this subsection shall not apply to any calendar quarter beginning after ,december #ca1 #bjai4 4 7b7 ,removal from brewery by pipeline ,section #edab is amended by inserting pursuant to section #edad or before by pipeline4 7c7 ,effective date ,the amendments made by this section shall apply to any calendar quarters beginning after ,december #ca1 #bjag4 #achjf4 ,reduced rate of excise tax on certain wine 7a7 ,in general ,section #ejda7;c7 is amended by adding at the end the following new paragraph3 7#h7 ,special rule for #bjah and #bjai 7,a7 ,in general ,in the case of wine removed after ,december #ca1 #bjag1 and before ,january #a1 #bjbj1 paragraphs 7#a7 and 7#b7 shall not apply and there shall be allowed as a credit against any tax imposed by this title 7other than chapters #b1 #ba1 and #bb7 an amount equal to the sum of-- 7i7 #a per wine gallon on the first #cj1jjj wine gallons of wine1 plus 7ii7 #ij cents per wine gallon on the first #ajj1jjj wine gallons of wine to which clause 7i7 does not apply1 plus 7iii7 #ec4e cents per wine gallon on the first #fbj1jjj wine gallons of wine to which clauses 7i7 and 7ii7 do not apply1 which are produced by the producer and removed during the calendar year for consumption or sale1 or which are imported by the importer into the ,united ,states during the calendar year4 7,b7 ,adjustment of credit for hard cider ,in the case of wine described in subsection 7b77#f71 subparagraph 7,a7 of this paragraph shall be applied-- 7i7 in clause 7i7 of such subparagraph1 by substituting #f4b cents for #a1 7ii7 in clause 7ii7 of such subparagraph1 by substituting #e4f cents for #ij cents1 and 7iii7 in clause 7iii7 of such subparagraph1 by substituting #c4c cents for #ec4e cents4 1 7b7 ,controlled group and single taxpayer rules ,paragraph 7#d7 of section #ejda7;c7 is amended by striking section #ejea7;a77#b77;,b7 and inserting section #ejea7;a77#e74 7c7 ,allowance of credit for foreign manufacturers and importers ,subsection 7c7 of section #ejda1 as amended by subsection 7a71 is amended-- 7#a7 in subparagraph 7,a7 of paragraph 7#h71 by inserting but only if the importer is an electing importer under paragraph 7#i7 and the wine gallons of wine have been assigned to the importer pursuant to such paragraph after into the ,united ,states during the calendar year1 and 7#b7 by adding at the end the following new paragraph3 7#i7 ,allowance of credit for foreign manufacturers and importers 7,a7 ,in general ,in the case of any wine gallons of wine which have been produced outside of the ,united ,states and imported into the ,united ,states1 the credit allowable under paragraph 7#h7 7referred to in this paragraph as the tax credit7 may be assigned by the person who produced such wine 7referred to in this paragraph as the foreign producer71 provided that such person makes an election described in subparagraph 7,b77ii71 to any electing importer of such wine gallons pursuant to the requirements established by the ,secretary under subparagraph 7,b74 7,b7 ,assignment ,the ,secretary shall1 through such rules1 regulations1 and procedures as are determined appropriate1 establish procedures for assignment of the tax credit provided under this paragraph1 which shall include-- 7i7 a limitation to ensure that the number of wine gallons of wine for which the tax credit has been assigned by a foreign producer-- 7,i7 to any importer does not exceed the number of wine gallons of wine produced by such foreign producer during the calendar year which were imported into the ,united ,states by such importer1 and 7,,ii7 to all importers does not exceed the #gej1jjj wine gallons of wine to which the tax credit applies1 7ii7 procedures that allow the election of a foreign producer to assign and an importer to receive the tax credit provided under this paragraph1 7iii7 requirements that the foreign producer provide any information as the ,secretary determines necessary and appropriate for purposes of carrying out this paragraph1 and 7iv7 procedures that allow for revocation of eligibility of the foreign producer and the importer for the tax credit provided under this paragraph in the case of any erroneous or fraudulent information provided under clause 7iii7 which the ,secretary deems to be material to qualifying for such credit4 7,c7 ,controlled group ,for purposes of this section1 any importer making an election described in subparagraph 7,b77ii7 shall be deemed to be a member of the controlled group of the foreign producer1 as described under paragraph 7#d74 4 7d7 ,effective date ,the amendments made by this section shall apply to wine removed after ,december #ca1 #bjag4 #achjg4 ,adjustment of alcohol content level for application of excise tax rates 7a7 ,in general ,paragraphs 7#a7 and 7#b7 of section #ejda7;b7 are each amended by inserting 7#af percent in the case of wine removed after ,december #ca1 #bjag1 and before ,january #a1 #bjbj after #ad percent4 7b7 ,effective date ,the amendments made by this section shall apply to wine removed after ,december #ca1 #bjag4 #achjh4 ,definition of mead and low alcohol by volume wine 7a7 ,in general ,section #ejda is amended-- 7#a7 in subsection 7a71 by striking ,still wines and inserting ,subject to subsection 7h71 still wines1 and 7#b7 by adding at the end the following new subsection3 7h7 ,mead and low alcohol by volume wine 7#a7 ,in general ,for purposes of subsections 7a7 and 7b77#a71 mead and low alcohol by volume wine shall be deemed to be still wines containing not more than #af percent of alcohol by volume4 7#b7 ,definitions 7,a7 ,mead ,for purposes of this section1 the term mead means a wine-- 7i7 containing not more than #j4fd gram of carbon dioxide per hundred milliliters of wine1 except that the ,secretary shall by regulations prescribe such tolerances to this limitation as may be reasonably necessary in good commercial practice1 7ii7 which is derived solely from honey and water1 7iii7 which contains no fruit product or fruit flavoring1 and 7iv7 which contains less than #h4e percent alcohol by volume4 7,b7 ,low alcohol by volume wine ,for purposes of this section1 the term low alcohol by volume wine means a wine-- 7i7 containing not more than #j4fd gram of carbon dioxide per hundred milliliters of wine1 except that the ,secretary shall by regulations prescribe such tolerances to this limitation as may be reasonably necessary in good commercial practice1 7ii7 which is derived-- 7,i7 primarily from grapes1 or 7,,ii7 from grape juice concentrate and water1 7iii7 which contains no fruit product or fruit flavoring other than grape1 and 7iv7 which contains less than #h4e percent alcohol by volume4 7#c7 ,termination ,this subsection shall not apply to wine removed after ,december #ca1 #bjai4 4 7b7 ,effective date ,the amendments made by this section shall apply to wine removed after ,december #ca1 #bjag4 #achji4 ,reduced rate of excise tax on certain distilled spirits 7a7 ,in general ,section #ejja is amended by redesignating subsection 7c7 as subsection 7d7 and by inserting after subsection 7b7 the following new subsection3 7c7 ,reduced rate for #bjah and #bjai 7#a7 ,in general ,in the case of a distilled spirits operation1 the otherwise applicable tax rate under subsection 7a77#a7 shall be-- 7,a7 #b4gj per proof gallon on the first #ajj1jjj proof gallons of distilled spirits1 and 7,b7 #ac4cd per proof gallon on the first #bb1acj1jjj of proof gallons of distilled spirits to which subparagraph 7,a7 does not apply1 which have been distilled or processed by such operation and removed during the calendar year for consumption or sale1 or which have been imported by the importer into the ,united ,states during the calendar year4 7#b7 ,controlled groups 7,a7 ,in general ,in the case of a controlled group1 the proof gallon quantities specified under subparagraphs 7,a7 and 7,b7 of paragraph 7#a7 shall be applied to such group and apportioned among the members of such group in such manner as the ,secretary or their delegate shall by regulations prescribe4 7,b7 ,definition ,for purposes of subparagraph 7,a71 the term controlled group shall have the meaning given such term by subsection 7a7 of section #aefc1 except that more than #ej percent shall be substituted for at least #hj percent each place it appears in such subsection4 7,c7 ,rules for non-corporations ,under regulations prescribed by the ,secretary1 principles similar to the principles of subparagraphs 7,a7 and 7,b7 shall be applied to a group under common control where one or more of the persons is not a corporation4 7,d7 ,single taxpayer ,pursuant to rules issued by the ,secretary1 two or more entities 7whether or not under common control7 that produce distilled spirits marketed under a similar brand1 license1 franchise1 or other arrangement shall be treated as a single taxpayer for purposes of the application of this subsection4 7#c7 ,termination ,this subsection shall not apply to distilled spirits removed after ,december #ca1 #bjai4 4 7b7 ,conforming amendment ,section #gfeb7;f77#b7 is amended by striking section #ejja7;a77#a7 and inserting subsection 7a77#a7 of section #ejja1 determined as if subsection 7c77#a7 of such section did not apply4 7c7 ,application of reduced tax rate for foreign manufacturers and importers ,subsection 7c7 of section #ejja1 as added by subsection 7a71 is amended-- 7#a7 in paragraph 7#a71 by inserting but only if the importer is an electing importer under paragraph 7#c7 and the proof gallons of distilled spirits have been assigned to the importer pursuant to such paragraph after into the ,united ,states during the calendar year1 and 7#b7 by adding at the end the following new paragraph3 7#c7 ,reduced tax rate for foreign manufacturers and importers 7,a7 ,in general ,in the case of any proof gallons of distilled spirits which have been produced outside of the ,united ,states and imported into the ,united ,states1 the rate of tax applicable under paragraph 7#a7 7referred to in this paragraph as the reduced tax rate7 may be assigned by the distilled sprits operation 7provided that such operation makes an election described in subparagraph 7,b77ii77 to any electing importer of such proof gallons pursuant to the requirements established by the ,secretary under subparagraph 7,b74 7,b7 ,assignment ,the ,secretary shall1 through such rules1 regulations1 and procedures as are determined appropriate1 establish procedures for assignment of the reduced tax rate provided under this paragraph1 which shall include-- 7i7 a limitation to ensure that the number of proof gallons of distilled spirits for which the reduced tax rate has been assigned by a distilled spirits operation-- 7,i7 to any importer does not exceed the number of proof gallons produced by such operation during the calendar year which were imported into the ,united ,states by such importer1 and 7,,ii7 to all importers does not exceed the #bb1bcj1jjj proof gallons of distilled spirits to which the reduced tax rate applies1 7ii7 procedures that allow the election of a distilled spirits operation to assign and an importer to receive the reduced tax rate provided under this paragraph1 7iii7 requirements that the distilled spirits operation provide any information as the ,secretary determines necessary and appropriate for purposes of carrying out this paragraph1 and 7iv7 procedures that allow for revocation of eligibility of the distilled spirits operation and the importer for the reduced tax rate provided under this paragraph in the case of any erroneous or fraudulent information provided under clause 7iii7 which the ,secretary deems to be material to qualifying for such reduced rate4 7,c7 ,controlled group 7i7 ,in general ,for purposes of this section1 any importer making an election described in subparagraph 7,b77ii7 shall be deemed to be a member of the controlled group of the distilled spirits operation1 as described under paragraph 7#b74 7ii7 ,apportionment ,for purposes of this paragraph1 in the case of a controlled group1 rules similar to section #ejea7;a77#e77;,b7 shall apply4 4 7d7 ,effective date ,the amendments made by this section shall apply to distilled spirits removed after ,december #ca1 #bjag4 #achaj4 ,bulk distilled spirits 7a7 ,in general ,section #ebab is amended by adding at the end the following sentence3 ,in the case of distilled spirits transferred in bond after ,december #ca1 #bjag1 and before ,january #a1 #bjbj1 this section shall be applied without regard to whether distilled spirits are bulk distilled spirits44 7b7 ,effective date ,the amendments made by this section shall apply distilled spirits transferred in bond after ,december #ca1 #bjag4 ,b ,miscellaneous provisions #achba4 ,modification of tax treatment of ,alaska ,native ,corporations and settlement trusts 7a7 ,exclusion for ,,ancsa payments assigned to ,alaska ,native ,settlement ,trusts 7#a7 ,in general ,part ,,iii of subchapter ,b of chapter #a is amended by inserting before section #adj the following new section3 #aci;,g4 ,assignments to ,alaska ,native ,settlement ,trusts 7a7 ,in general ,in the case of a ,native ,corporation1 gross income shall not include the value of any payments that would otherwise be made1 or treated as being made1 to such ,native ,corporation pursuant to1 or as required by1 any provision of the ,alaska ,native ,claims ,settlement ,act 7#dc ,u4,s4,c4 #afja et seq471 including any payment that would otherwise be made to a ,village ,corporation pursuant to section #g7;j7 of the ,alaska ,native ,claims ,settlement ,act 7#dc ,u4,s4,c4 #afjf7;j771 provided that any such payments-- 7#a7 are assigned in writing to a ,settlement ,trust1 and 7#b7 were not received by such ,native ,corporation prior to the assignment described in paragraph 7#a74 7b7 ,inclusion in gross income ,in the case of a ,settlement ,trust which has been assigned payments described in subsection 7a71 gross income shall include such payments when received by such ,settlement ,trust pursuant to the assignment and shall have the same character as if such payments were received by the ,native ,corporation4 7c7 ,amount and scope of assignment ,the amount and scope of any assignment under subsection 7a7 shall be described with reasonable particularity and may either be in a percentage of one or more such payments or in a fixed dollar amount4 7d7 ,duration of assignment2 revocability ,any assignment under subsection 7a7 shall specify-- 7#a7 a duration either in perpetuity or for a period of time1 and 7#b7 whether such assignment is revocable4 7e7 ,prohibition on deduction ,notwithstanding section #bdg1 no deduction shall be allowed to a ,native ,corporation for purposes of any amounts described in subsection 7a74 7f7 ,definitions ,for purposes of this section1 the terms ,native ,corporation and ,settlement ,trust have the same meaning given such terms under section #fdf7;h74 4 7#b7 ,conforming amendment ,the table of sections for part ,,iii of subchapter ,b of chapter #a is amended by inserting before the item relating to section #adj the following new item3 ,sec4 #aci;,g4 ,assignments to ,alaska ,native ,settlement ,trusts4 4 7#c7 ,effective date ,the amendments made by this subsection shall apply to taxable years beginning after ,december #ca1 #bjaf4 7b7 ,deduction of contributions to ,alaska ,native ,settlement ,trusts 7#a7 ,in general ,part ,,viii of subchapter ,b of chapter #a is amended by inserting before section #bdh the following new section3 #bdg4 ,contributions to ,alaska ,native ,settlement ,trusts 7a7 ,in general ,in the case of a ,native ,corporation1 there shall be allowed a deduction for any contributions made by such ,native ,corporation to a ,settlement ,trust 7regardless of whether an election under section #fdf is in effect for such ,settlement ,trust7 for which the ,native ,corporation has made an annual election under subsection 7e74 7b7 ,amount of deduction ,the amount of the deduction under subsection 7a7 shall be equal to-- 7#a7 in the case of a cash contribution 7regardless of the method of payment1 including currency1 coins1 money order1 or check71 the amount of such contribution1 or 7#b7 in the case of a contribution not described in paragraph 7#a71 the lesser of-- 7,a7 the ,native ,corporation's adjusted basis in the property contributed1 or 7,b7 the fair market value of the property contributed4 7c7 ,limitation and carryover 7#a7 ,in general ,subject to paragraph 7#b71 the deduction allowed under subsection 7a7 for any taxable year shall not exceed the taxable income 7as determined without regard to such deduction7 of the ,native ,corporation for the taxable year in which the contribution was made4 7#b7 ,carryover ,if the aggregate amount of contributions described in subsection 7a7 for any taxable year exceeds the limitation under paragraph 7#a71 such excess shall be treated as a contribution described in subsection 7a7 in each of the #ae succeeding years in order of time4 7d7 ,definitions ,for purposes of this section1 the terms ,native ,corporation and ,settlement ,trust have the same meaning given such terms under section #fdf7;h74 7e7 ,manner of making election 7#a7 ,in general ,for each taxable year1 a ,native ,corporation may elect to have this section apply for such taxable year on the income tax return or an amendment or supplement to the return of the ,native ,corporation1 with such election to have effect solely for such taxable year4 7#b7 ,revocation ,any election made by a ,native ,corporation pursuant to this subsection may be revoked pursuant to an amendment or supplement to the income tax return which has been timely filed by such ,native ,corporation4 7f7 ,additional rules 7#a7 ,earnings and profits ,notwithstanding section #fdf7;d77#b71 in the case of a ,native ,corporation which claims a deduction under this section for any taxable year1 the earnings and profits of such ,native ,corporation for such taxable year shall be reduced by the amount of such deduction4 7#b7 ,gain or loss ,no gain or loss shall be recognized by the ,native ,corporation with respect to a contribution of property for which a deduction is allowed under this section4 7#c7 ,income ,subject to subsection 7g71 a ,settlement ,trust shall include in income the amount of any deduction allowed under this section in the taxable year in which the ,settlement ,trust actually receives such contribution4 7#d7 ,period ,the holding period under section #abbc of the ,settlement ,trust shall include the period the property was held by the ,native ,corporation4 7#e7 ,basis ,the basis that a ,settlement ,trust has for which a deduction is allowed under this section shall be equal to the lesser of-- 7,a7 the adjusted basis of the ,native ,corporation in such property immediately before such contribution1 or 7,b7 the fair market value of the property immediately before such contribution4 7#f7 ,prohibition ,no deduction shall be allowed under this section with respect to any contributions made to a ,settlement ,trust which are in violation of subsection 7a77#b7 or 7c77#b7 of section #ci of the ,alaska ,native ,claims ,settlement ,act 7#dc ,u4,s4,c4 #afbi;e74 7g7 ,election by ,settlement ,trust ,to ,defer ,income ,recognition 7#a7 ,in general ,in the case of a contribution which consists of property other than cash1 a ,settlement ,trust may elect to defer recognition of any income related to such property until the sale or exchange of such property1 in whole or in part1 by the ,settlement ,trust4 7#b7 ,treatment ,in the case of property described in paragraph 7#a71 any income or gain realized on the sale or exchange of such property shall be treated as-- 7,a7 for such amount of the income or gain as is equal to or less than the amount of income which would be included in income at the time of contribution under subsection 7f77#c7 but for the taxpayer's election under this subsection1 ordinary income1 and 7,b7 for any amounts of the income or gain which are in excess of the amount of income which would be included in income at the time of contribution under subsection 7f77#c7 but for the taxpayer's election under this subsection1 having the same character as if this subsection did not apply4 7#c7 ,election 7,a7 ,in general ,for each taxable year1 a ,settlement ,trust may elect to apply this subsection for any property described in paragraph 7#a7 which was contributed during such year4 ,any property to which the election applies shall be identified and described with reasonable particularity on the income tax return or an amendment or supplement to the return of the ,settlement ,trust1 with such election to have effect solely for such taxable year4 7,b7 ,revocation ,any election made by a ,settlement ,trust pursuant to this subsection may be revoked pursuant to an amended income tax return which has been timely filed by such ,settlement ,trust4 7,c7 ,certain dispositions 7i7 ,in general ,in the case of any property for which an election is in effect under this subsection and which is disposed of within the first taxable year subsequent to the taxable year in which such property was contributed to the ,settlement ,trust-- 7,i7 this section shall be applied as if the election under this subsection had not been made1 7,,ii7 any income or gain which would have been included in the year of contribution under subsection 7f77#c7 but for the taxpayer's election under this subsection shall be included in income for the taxable year of such contribution1 and 7,,iii7 the ,settlement ,trust shall pay any increase in tax resulting from such inclusion1 including any applicable interest1 and increased by #aj percent of the amount of such increase with interest4 7ii7 ,assessment ,notwithstanding section #feja7;a71 any amount described in subclause 7,,iii7 of clause 7i7 may be assessed1 or a proceeding in court with respect to such amount may be initiated without assessment1 within #d years after the date on which the return making the election under this subsection for such property was filed4 4 7#b7 ,conforming amendment ,the table of sections for part ,,viii of subchapter ,b of chapter #a is amended by inserting before the item relating to section #bdh the following new item3 ,sec4 #bdg4 ,contributions to ,alaska ,native ,settlement ,trusts4 4 7#c7 ,permissive ,amendments to ,trust ,agreements ,establishing ,settlement ,trusts 7,a7 ,in general ,notwithstanding any provision of law1 including any provision of the ,alaska ,native ,claims ,settlement ,act 7#dc ,u4,s4,c4 #afja et seq471 ,alaska ,state law1 or the terms of any trust agreement of a ,settlement ,trust 7as defined under section #c7t7 of the ,alaska ,native ,claims ,settlement ,act 7#dc ,u4,s4,c4 #afjb7t7771 the terms of any trust agreement of a ,settlement ,trust may1 within the #a-year period following the date of the enactment of this ,act1 be amended as necessary to allow such ,trust to make an election described in subsection 7g7 of section #bdg of the ,internal ,revenue ,code of #aihf 7as added by paragraph 7#a774 7,b7 ,amendment ,an amendment described in subparagraph 7,a7 shall be enacted pursuant to one or more agreements between the ,native ,corporation that established the ,settlement ,trust and the trustees of such ,trust and shall not require any vote by the beneficiaries of such ,trust or the shareholders of such ,native ,corporation4 7,c7 ,registration statement ,any ,settlement ,trust which was registered in accordance with ,alaska ,state law prior to the date of the enactment of an amendment described in subparagraph 7,a7 shall not be required to file a new or amended registration statement to reflect such amendment4 7#d7 ,effective date 7,a7 ,in general ,the amendments made by this subsection shall apply to taxable years for which the period of limitation on refund or credit under section #feaa of the ,internal ,revenue ,code of #aihf has not expired4 7,b7 ,one-year waiver of statute of limitations ,if the period of limitation on a credit or refund resulting from the amendments made by paragraph 7#a7 expires before the end of the #a-year period beginning on the date of the enactment of this ,act1 refund or credit of such overpayment 7to the extent attributable to such amendments7 may1 nevertheless1 be made or allowed if claim therefor is filed before the close of such #a-year period4 7c7 ,information reporting for deductible contributions to ,alaska ,native ,settlement ,trusts 7#a7 ,in general ,section #fjci;,h is amended-- 7,a7 in the heading1 by striking sponsoring1 and 7,b7 by adding at the end the following new subsection3 7e7 ,deductible contributions by ,native ,corporations to ,alaska ,native ,settlement ,trusts 7#a7 ,in general ,any ,native ,corporation 7as defined in subsection 7m7 of section #c of the ,alaska ,native ,claims ,settlement ,act 7#dc ,u4,s4,c4 #afjb7m777 which has made a contribution to a ,settlement ,trust 7as defined in subsection 7t7 of such section7 to which an election under subsection 7e7 of section #bdg applies shall provide such ,settlement ,trust with a statement regarding such election not later than ,january #ca of the calendar year subsequent to the calendar year in which the contribution was made4 7#b7 ,content of ,statement ,the statement described in paragraph 7#a7 shall include-- 7,a7 the total amount of contributions to which the election under subsection 7e7 of section #bdg applies1 7,b7 for each contribution1 whether such contribution was in cash1 7,c7 for each contribution which consists of property other than cash1 the date that such property was acquired by the ,native ,corporation and the adjusted basis of such property on the date such property was contributed to the ,settlement ,trust1 7,d7 the date on which each contribution was made to the ,settlement ,trust1 and 7,e7 such information as the ,secretary determines to be necessary or appropriate for the identification of each contribution and the accurate inclusion of income relating to such contributions by the ,settlement ,trust4 4 7#b7 ,conforming amendment ,the item relating to section #fjci;,h in the table of sections for subpart ,a of part ,,iii of subchapter ,a of chapter #fa is amended to read as follows3 ,sec4 #fjci;,h4 ,information ,with ,respect to ,alaska ,native ,settlement ,trusts and ,native ,corporations4 4 7#c7 ,effective date ,the amendments made by this subsection shall apply to taxable years beginning after ,december #ca1 #bjaf4 7d7 ,statutory construction ,this section is remedial ,indian legislation enacted under the plenary authority of the ,congress under the ,constitution of the ,united ,states to regulate ,indian affairs1 and any ambiguities in section #aci;,f or #bdg of the ,internal ,revenue ,code of #aihf1 as added by this ,act1 shall be resolved in favor of ,native ,corporations attempting to exclude income or claim a deduction thereunder4 #achbb4 ,amounts paid for aircraft management services 7a7 ,in general ,subsection 7e7 of section #dbfa is amended by adding at the end the following new paragraph3 7#e7 ,amounts paid for aircraft management services 7,a7 ,in general ,no tax shall be imposed by this section or section #dbga on any amounts paid by an aircraft owner for aircraft management services related to-- 7i7 maintenance and support of the aircraft owner's aircraft1 or 7ii7 flights on the aircraft owner's aircraft4 7,b7 ,aircraft management services ,for purposes of subparagraph 7,a71 the term aircraft management services includes-- 7i7 assisting an aircraft owner with administrative and support services1 such as scheduling1 flight planning1 and weather forecasting1 7ii7 obtaining insurance1 7iii7 maintenance1 storage and fueling of aircraft1 7iv7 hiring1 training1 and provision of pilots and crew1 7v7 establishing and complying with safety standards1 and 7vi7 such other services as are necessary to support flights operated by an aircraft owner4 7,c7 ,lessee treated as aircraft owner 7i7 ,in general ,for purposes of this paragraph1 the term aircraft owner includes a person who leases the aircraft other than under a disqualified lease4 7ii7 ,disqualified lease ,for purposes of clause 7i71 the term disqualified lease means a lease from a person providing aircraft management services with respect to such aircraft 7or a related person 7within the meaning of section #dfe7;b77#c77;,c77 to the person providing such services71 if such lease is for a term of #ca days or less4 7,d7 ,pro rata allocation ,in the case of amounts paid to any person which 7but for this subsection7 are subject to the tax imposed by subsection 7a71 a portion of which consists of amounts described in subparagraph 7,a71 this paragraph shall apply on a pro rata basis only to the portion which consists of amounts described in such subparagraph4 4 7b7 ,effective date ,the amendment made by this section shall apply to amounts paid after the date of the enactment of this ,act4 #achbc4 ,opportunity zones 7a7 ,in general ,chapter #a is amended by adding at the end the following3 ,z ,opportunity ,zones ,sec4 #adjj,z-#a4 ,designation4 ,sec4 #adjj,z-#b4 ,special rules for capital gains invested in opportunity zones4 #adjj,z-#a4 ,designation 7a7 ,qualified opportunity zone defined ,for the purposes of this subchapter1 the term qualified opportunity zone means a population census tract that is a low-income community that is designated as a qualified opportunity zone4 7b7 ,designation 7#a7 ,governor 7,a7 ,in general ,for purposes of subsection 7a71 a population census tract that is a low-income community is designated as a qualified opportunity zone if-- 7i7 not later than the end of the determination period1 the governor of the ,state in which the tract is located-- 7,i7 nominates the tract for designation as a qualified opportunity zone1 and 7,,ii7 notifies the ,secretary in writing of such nomination1 and 7ii7 the ,secretary certifies such nomination and designates such tract as a qualified opportunity zone before the end of the consideration period4 7,b7 ,extension of periods ,a governor may request that the ,secretary extend either the determination or consideration period1 or both 7determined without regard to this subparagraph71 for an additional #cj days4 7,c7 ,deemed designation if ,secretary fails to act ,unless the tracts are ineligible for designation1 if the ,secretary declines in writing to make such certification and designation or fails to act before the end of the consideration period1 such nomination shall be deemed to be certified and designated1 effective on the day after the last day of the consideration period4 7#b7 ,secretary ,if a governor fails to make the nominations and notifications by the end of the periods referred to in paragraphs 7#a77;,a7 and 7#a77;,b71 the ,secretary shall designate and certify population census tracts that are low-income communities as qualified opportunity zones1 as permitted by subsection 7e74 7c7 ,other definitions ,for purposes of this subsection-- 7#a7 ,low-income communities ,the term low-income community has the same meaning as when used in section #de;,d7e74 7#b7 ,definition of periods 7,a7 ,consideration period ,the term consideration period means the #cj-;day period beginning on the date on which the ,secretary receives notice under subsection 7b77#a77;,a77i77,,ii71 as extended under subsection 7b77#a77;,b74 7,b7 ,determination period ,the term determination period means the #ij-;day period beginning on the date of the enactment of the ,tax ,cuts and ,jobs ,act1 as extended under subsection 7b77#a77;,b74 7#c7 ,state ,for purposes of this section1 the term ,state includes any possession of the ,united ,states4 7d7 ,guidance for opportunity zone nominations ,when considering the nomination of qualified opportunity zones1 governors should strive for the creation of qualified opportunity zones that are geographically concentrated and contiguous clusters of population census tracts and should give particular consideration to areas that-- 7#a7 are currently the focus of mutually reinforcing ,state1 local1 or private economic development initiatives to attract investment and foster startup activity1 7#b7 have demonstrated success in geographically targeted development programs1 such as promise zones1 new market tax credit1 empowerment zones1 and renewal communities1 and 7#c7 have recently experienced significant layoffs due to business closures or relocations4 7e7 ,number of designations 7#a7 ,in general ,except as provided by paragraph 7#b71 the number of population census tracts in a ,state that may be designated as qualified opportunity zones under this section may not exceed #be percent of the number of low-income communities in the ,state4 7#b7 ,exception ,if the number of low-income communities in a ,state is less than #ajj1 then a total of #be of such tracts may be designated as qualified opportunity zones4 7f7 ,designation of tracts contiguous with low-,income communities 7#a7 ,in general ,a population census tract that is not a low-income community may be designated as a qualified opportunity zone under this section if-- 7,a7 the tract is contiguous with the low-income community that is designated as a qualified opportunity zone1 and 7,b7 the median family income of the tract does not exceed #abe percent of the median family income of the low-income community with which the tract is contiguous4 7#b7 ,limitation ,not more than #e percent of the population census tracts designated in a ,state as a qualified opportunity zone may be designated under paragraph 7#a74 7g7 ,period for which designation is in effect ,a designation as a qualified opportunity zone shall remain in effect for the period beginning on the date of the designation and ending at the close of the #ajth calendar year beginning on or after such date of designation4 #adjj,z-#b4 ,special rules for capital gains invested in opportunity zones 7a7 ,in general ,in the case of gain from the sale to1 or exchange with1 an unrelated person of any property held by the taxpayer1 at the election of the taxpayer-- 7#a7 gross income for the taxable year shall not include so much of such gain as does not exceed the aggregate amount invested by the taxpayer in a qualified opportunity fund during the #ahj-;day period beginning on the date of such sale or exchange1 7#b7 the amount of gain excluded by paragraph 7#a7 shall be included in gross income as provided by subsection 7b71 and 7#c7 subsection 7c7 shall apply4 ,no election may be made under the preceding sentence with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect4 7b7 ,deferral of gain invested in opportunity zone property 7#a7 ,year of inclusion ,gain to which subsection 7a77#b7 applies shall be included in income in the taxable year which includes the earlier of-- 7,a7 the date on which such investment is sold or exchanged1 or 7,b7 ,december #ca1 #bjbf4 7#b7 ,amount includible 7,a7 ,in general ,the amount of gain included in gross income under subsection 7a77#a7 shall be the excess of-- 7i7 the lesser of the amount of gain excluded under paragraph 7#a7 or the fair market value of the property as of the determined as of the date described in paragraph 7#a71 over 7ii7 the taxpayer's basis in the investment4 7,b7 ,determination of basis 7i7 ,in general ,except as otherwise provided in this clause or subsection 7c71 the taxpayer's basis in the investment shall be zero4 7ii7 ,increase for gain recognized under subsection 7a77#b7 ,the basis in the investment shall be increased by the amount of gain recognized by reason of subsection 7a77#b7 with respect to such property4 7iii7 ,investments held for #e years ,in the case of any investment held for at least #e years1 the basis of such investment shall be increased by an amount equal to #aj percent of the amount of gain deferred by reason of subsection 7a77#a74 7iv7 ,investments held for #g years ,in the case of any investment held by the taxpayer for at least #g years1 in addition to any adjustment made under clause 7iii71 the basis of such property shall be increased by an amount equal to #e percent of the amount of gain deferred by reason of subsection 7a77#a74 7c7 ,special rule for investments held for at least #aj years ,in the case of any investment held by the taxpayer for at least #aj years and with respect to which the taxpayer makes an election under this clause1 the basis of such property shall be equal to the fair market value of such investment on the date that the investment is sold or exchanged4 7d7 ,qualified opportunity fund ,for purposes of this section-- 7#a7 ,qualified opportunity fund ,the term qualified opportunity fund means any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property 7other than another qualified opportunity fund7 that holds at least #ij percent of its assets in qualified opportunity zone property1 determined-- 7,a7 on the last day of the first #f-month period of the taxable year of the fund1 and 7,b7 on the last day of the taxable year of the fund4 7#b7 ,qualified opportunity zone property 7,a7 ,in general ,the term qualified opportunity zone property means property which is-- 7i7 qualified opportunity zone stock1 7ii7 qualified opportunity zone partnership interest1 or 7iii7 qualified opportunity zone business property4 7,b7 ,qualified opportunity zone stock 7i7 ,in general ,except as provided in clause 7ii71 the term qualified opportunity zone stock means any stock in a domestic corporation if-- 7,i7 such stock is acquired by the taxpayer after ,december #ca1 #bjag1 at its original issue 7directly or through an underwriter7 from the corporation solely in exchange for cash1 7,,ii7 as of the time such stock was issued1 such corporation was a qualified opportunity zone business 7or1 in the case of a new corporation1 such corporation was being organized for purposes of being a qualified opportunity zone business71 and 7,,iii7 during substantially all of the taxpayer's holding period for such stock1 such corporation qualified as a qualified opportunity zone business4 7ii7 ,redemptions ,a rule similar to the rule of section #abjb7;c77#c7 shall apply for purposes of this paragraph4 7,c7 ,qualified opportunity zone partnership interest ,the term qualified opportunity zone partnership interest means any capital or profits interest in a domestic partnership if-- 7i7 such interest is acquired by the taxpayer after ,december #ca1 #bjag1 from the partnership solely in exchange for cash1 7ii7 as of the time such interest was acquired1 such partnership was a qualified opportunity zone business 7or1 in the case of a new partnership1 such partnership was being organized for purposes of being a qualified opportunity zone business71 and 7iii7 during substantially all of the taxpayer's holding period for such interest1 such partnership qualified as a qualified opportunity zone business4 7,d7 ,qualified opportunity zone business property 7i7 ,in general ,the term qualified opportunity zone business property means tangible property used in a trade or business of the taxpayer if-- 7,i7 such property was acquired by the taxpayer by purchase 7as defined in section #agi7;d77#b77 after ,december #ca1 #bjag1 7,,ii7 the original use of such property in the qualified opportunity zone commences with the taxpayer or the taxpayer substantially improves the property1 and 7,,iii7 during substantially all of the taxpayer's holding period for such property1 substantially all of the use of such property was in a qualified opportunity zone4 7ii7 ,substantial improvement ,for purposes of subparagraph 7,a77ii71 property shall be treated as substantially improved by the taxpayer only if1 during any #cj-month period beginning after the date of acquisition of such property1 additions to basis with respect to such property in the hands of the taxpayer exceed an amount equal to the adjusted basis of such property at the beginning of such #cj-month period in the hands of the taxpayer4 7iii7 ,related party ,for purposes of subparagraph 7,a77i71 the related person rule of section #agi7;d77#b7 shall be applied pursuant to paragraph 7#h7 of this subsection in lieu of the application of such rule in section #agi7;d77#b77;,a74 7#c7 ,qualified opportunity zone business 7,a7 ,in general ,the term qualified opportunity zone business means a trade or business-- 7i7 in which substantially all of the tangible property owned or leased by the taxpayer is qualified opportunity zone business property1 7ii7 which satisfies the requirements of paragraphs 7#b71 7#d71 and 7#h7 of section #acig;,c7b71 and 7iii7 which is not described in section #add7;c77#f77;,b74 7,b7 ,special rule ,for purposes of subparagraph 7,a71 tangible property that ceases to be a qualified opportunity zone business property shall continue to be treated as a qualified opportunity zone business property for the lesser of-- 7i7 #e years after the date on which such tangible property ceases to be so qualified1 or 7ii7 the date on which such tangible property is no longer held by the qualified opportunity zone business4 7e7 ,applicable rules 7#a7 ,treatment of investments with mixed funds ,in the case of any investment in a qualified opportunity fund only a portion of which consists of investments of gain to which an election under subsection 7a77#a7 is in effect-- 7,a7 such investment shall be treated as #b separate investments1 consisting of-- 7i7 one investment that only includes amounts to which the election under subsection 7a77#a7 applies1 and 7ii7 a separate investment consisting of other amounts1 and 7,b7 subsections 7a71 7b71 and 7c7 shall only apply to the investment described in subparagraph 7,a77i74 7#b7 ,related persons ,for purposes of this section1 persons are related to each other if such persons are described in section #bfg7;b7 or #gjg7;b77#a71 determined by substituting #bj percent for #ej percent each place it occurs in such sections4 7#c7 ,decedents ,in the case of a decedent1 amounts recognized under this section shall1 if not properly includible in the gross income of the decedent1 be includible in gross income as provided by section #fia4 7#d7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section1 including-- 7,a7 rules for the certification of qualified opportunity funds for the purposes of this section1 and 7,b7 rules to prevent abuse4 7f7 ,failure of qualified opportunity fund to maintain investment standard 7#a7 ,in general ,if a qualified opportunity fund fails to meet the #ij-percent requirement of subsection 7c77#a71 the qualified opportunity fund shall pay a penalty for each month it fails to meet the requirement in an amount equal to the product of-- 7,a7 the excess of-- 7i7 the amount equal to #ij percent of its aggregate assets1 over 7ii7 the aggregate amount of qualified opportunity zone property held by the fund1 multiplied by 7,b7 the underpayment rate established under section #ffba7;a77#b7 for such month4 7#b7 ,special rule for partnerships ,in the case that the qualified opportunity fund is a partnership1 the penalty imposed by paragraph 7#a7 shall be taken into account proportionately as part of the distributive share of each partner of the partnership4 7#c7 ,reasonable cause exception ,no penalty shall be imposed under this subsection with respect to any failure if it is shown that such failure is due to reasonable cause4 4 7b7 ,basis adjustments ,section #ajaf7;a7 is amended by striking and at the end of paragraph 7#cf71 by striking the period at the end of paragraph 7#cg7 and inserting 1 and1 and by inserting after paragraph 7#cg7 the following3 7#ch7 to the extent provided in subsections 7b77#b7 and 7c7 of section #adjj,z-#b4 4 7c7 ,report to ,congress ,the ,secretary of the ,treasury1 or the ,secretary's delegate1 shall submit a report to ,congress on the opportunity zone incentives enacted by this section beginning #e years after the date of enactment of this ,act and annually thereafter4 ,the report shall include an assessment of investments held by qualified opportunity funds nationally and at the ,state level4 ,to the extent such information is available1 the report shall include the number of qualified opportunity funds1 the amount of assets held in qualified opportunity funds1 the composition of qualified opportunity fund investments by asset class1 the percentage of qualified opportunity zone census tracts designated under subchapter ,z of the ,internal ,revenue ,code of #aihf 7as added by this section7 that have received qualified opportunity fund investments4 ,the report shall also include an assessment of the impacts and outcomes of the investments in those areas on economic indicators including job creation1 poverty reduction1 and new business starts1 and other metrics as determined by the ,secretary4 7d7 ,clerical amendment ,the table of subchapters for chapter #a is amended by adding at the end the following new item3 ,subchapter ,z4 ,opportunity zones 4 7e7 ,effective date ,the amendments made by this section shall take effect on the date of the enactment of this ,act4 ,d ,international tax provisions ,i ,outbound transactions ,a ,establishment of participation exemption system for taxation of foreign income #adaja4 ,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 section-- 7#a7 ,in general ,the term specified #aj-percent owned foreign corporation means any foreign corporation with respect to which any domestic corporation is a ,united ,states shareholder with respect to such corporation4 7#b7 ,exclusion of passive foreign investment companies ,such term shall not include any corporation which is a passive foreign investment company 7as defined in section #abig7 with respect to the shareholder and which 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 from a specified #aj-percent owned foreign corporation is an amount which bears the same ratio to such dividend as-- 7,a7 the undistributed foreign earnings of the specified #aj-percent owned foreign corporation1 bears to 7,b7 the total undistributed earnings of such foreign corporation4 7#b7 ,undistributed earnings ,the term 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-- 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 ,undistributed foreign earnings ,the term undistributed foreign earnings means the portion of the 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 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 distribution any portion of which constitutes a 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 ,special rules for hybrid dividends 7#a7 ,in general ,subsection 7a7 shall not apply to any dividend received by a ,united ,states shareholder from a controlled foreign corporation if the dividend is a hybrid dividend4 7#b7 ,hybrid dividends of tiered corporations ,if a controlled foreign corporation with respect to which a domestic corporation is a ,united ,states shareholder receives a hybrid dividend from any other controlled foreign corporation with respect to which such domestic corporation is also a ,united ,states shareholder1 then1 notwithstanding any other provision of this title-- 7,a7 the hybrid dividend shall be treated for purposes of section #iea7;a77#a77;,a7 as subpart ,f income of the receiving controlled foreign corporation for the taxable year of the controlled foreign corporation in which the dividend was received1 and 7,b7 the ,united ,states shareholder shall include in gross income an amount equal to the shareholder's pro rata share 7determined in the same manner as under section #iea7;a77#b77 of the subpart ,f income described in subparagraph 7,a74 7#c7 ,denial of foreign tax credit1 etc ,the rules of subsection 7d7 shall apply to any hybrid dividend received by1 or any amount included under paragraph 7#b7 in the gross income of1 a ,united ,states shareholder4 7#d7 ,hybrid dividend ,the term hybrid dividend means an amount received from a controlled foreign corporation-- 7,a7 for which a deduction would be allowed under subsection 7a7 but for this subsection1 and 7,b7 for which the controlled foreign corporation received a deduction 7or other tax benefit7 from taxes imposed by any foreign country4 7f7 ,special rule for purging distributions of passive foreign investment companies ,any amount which is treated as a dividend under section #abia7;d77#b77;,b7 shall not be treated as a dividend for purposes of this section4 7g7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section1 including regulations for the treatment of ,united ,states shareholders owning stock of a specified #aj percent owned foreign corporation through a partnership4 4 7b7 ,application of holding period requirement ,subsection 7c7 of section #bdf 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 #a-year holding period requirement ,for purposes of section #bde;,a-- 7i7 paragraph 7#a77;,a7 shall be applied-- 7,i7 by substituting #cfe days for #de days each place it appears1 and 7,,ii7 by substituting #gca-;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 at all times during such period1 and 7ii7 the taxpayer is a ,united ,states shareholder with respect to such specified #aj-percent owned foreign corporation at all times during such period4 4 7c7 ,application of rules generally applicable to deductions for dividends received 7#a7 ,treatment of dividends from certain corporations ,paragraph 7#a7 of section #bdf7;a7 is amended by striking and #bde and inserting #bde1 and #bde;,a4 7#b7 ,assets generating tax-exempt portion of dividend not taken into account in allocating and apportioning deductible expenses ,paragraph 7#c7 of section #hfd7;e7 is amended by striking or #bde7;a7 and inserting 1 #bde7;a71 or #bde;,a4 7#c7 ,coordination with section #ajei ,subparagraph 7,b7 of section #ajei7;b77#b7 is amended by striking or #bde and inserting #bde1 or #bde;,a4 7d7 ,coordination with foreign tax credit limitation ,subsection 7b7 of section #ijd 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 domestic corporation which is a ,united ,states shareholder with respect to a specified #aj-percent owned foreign corporation1 such domestic corporation's taxable income from sources without the ,united ,states 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 to such portion4 ,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 ,subsection 7b7 of section #iea is amended by striking subpart and inserting title4 7#b7 ,subsection 7a7 of section #ieg is amended by striking subpart in the matter preceding paragraph 7#a7 and inserting title4 7#c7 ,the table of sections for part ,,viii of subchapter ,b of chapter #a is amended by inserting after the item relating to section #bde the following new item3 ,sec4 #bde;,a4 ,dividends received by domestic corporations from certain foreign corporations4 4 7f7 ,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 #adajb4 ,special rules relating to sales or transfers involving specified #aj-percent owned foreign corporations 7a7 ,sales by ,united ,states persons of stock ,section #abdh is amended by redesignating subsection 7j7 as subsection 7k7 and by inserting after subsection 7i7 the following new subsection3 7j7 ,coordination with dividends received deduction ,in the case of the sale or exchange by a domestic corporation of stock in a foreign corporation held for #a year or more1 any amount received by the domestic corporation which is treated as a dividend by reason of this section shall be treated as a dividend for purposes of applying section #bde;,a4 4 7b7 ,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 receives 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 stock4 4 7#b7 ,effective date ,the amendments made by this subsection shall apply to dividends received in taxable years beginning after ,december #ca1 #bjag4 7c7 ,sale by a ,,cfc of a lower tier ,,cfc ,section #ifd7;e7 is amended by adding at the end the following new paragraph3 7#d7 ,coordination with dividends received deduction 7,a7 ,in general ,if1 for any taxable year of a controlled foreign corporation beginning after ,december #ca1 #bjag1 any amount is treated as a dividend under paragraph 7#a7 by reason of a sale or exchange by the controlled foreign corporation of stock in another foreign corporation held for #a year or more1 then1 notwithstanding any other provision of this title-- 7i7 the foreign-source portion of such dividend shall be treated for purposes of section #iea7;a77#a77;,a7 as subpart ,f income of the selling controlled foreign corporation for such taxable year1 7ii7 a ,united ,states shareholder with respect to the selling controlled foreign corporation shall include in gross income for the taxable year of the shareholder with or within which such taxable year of the controlled foreign corporation ends an amount equal to the shareholder's pro rata share 7determined in the same manner as under section #iea7;a77#b77 of the amount treated as subpart ,f income under clause 7i71 and 7iii7 the deduction under section #bde;,a7a7 shall be allowable to the ,united ,states shareholder with respect to the subpart ,f income included in gross income under clause 7ii7 in the same manner as if such subpart ,f income were a dividend received by the shareholder from the selling controlled foreign corporation4 7,b7 ,effect of loss on earnings and profits ,for purposes of this title1 in the case of a sale or exchange by a controlled foreign corporation of stock in another foreign corporation in a taxable year of the selling controlled foreign corporation beginning after ,december #ca1 #bjag1 to which this paragraph would apply if gain were recognized1 the earnings and profits of the selling controlled foreign corporation shall not be reduced by reason of any loss from such sale or exchange4 7,c7 ,foreign-source portion ,for purposes of this paragraph1 the foreign-source portion of any amount treated as a dividend under paragraph 7#a7 shall be determined in the same manner as under section #bde;,a7c74 4 7d7 ,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;,c71 as in effect before the date of the enactment of the ,tax ,cuts and ,jobs ,act7 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 ,limitation and carryforward based on foreign-source dividends received 7#a7 ,in general ,the amount included in the gross income of the taxpayer under subsection 7a7 for any taxable year shall not exceed the amount allowed as a deduction under section #bde;,a for such taxable year 7taking into account dividends received from all specified #aj-percent owned foreign corporations with respect to which the taxpayer is a ,united ,states shareholder74 7#b7 ,amounts not included carried forward ,any amount not included in gross income for any taxable year by reason of paragraph 7#a7 shall1 subject to the application of paragraph 7#a7 to the succeeding taxable year1 be included in gross income for the succeeding taxable year4 7c7 ,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 7d7 ,reduction for recognized gains ,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 7e7 ,source of income ,amounts included in gross income under this section shall be treated as derived from sources within the ,united ,states4 7f7 ,basis adjustments ,consistent with such regulations or other guidance as the ,secretary shall 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 ,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#c7 ,effective date ,the amendments made by this subsection shall apply to transfers after ,december #ca1 #bjag4 7e7 ,repeal of active trade or business exception under section #cfg 7#a7 ,in general ,section #cfg7;a7 is amended by striking paragraph 7#c7 and redesignating paragraphs 7#d71 7#e71 and 7#f7 as paragraphs 7#c71 7#d71 and 7#e71 respectively 7#b7 ,conforming amendments ,section #cfg7;a77#d71 as redesignated by paragraph 7#a71 is amended-- 7,a7 by striking ,paragraphs 7#b7 and 7#c7 and inserting ,paragraph 7#b71 and 7,b7 by striking ,paragraphs 7#b7 and 7#c7 in the heading and inserting ,paragraph 7#b74 7#c7 ,effective date ,the amendments made by this subsection shall apply to transfers after ,december #ca1 #bjag4 #adajc4 ,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 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 #i1 #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 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 ep 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 ep deficits ,for purposes of this subsection-- 7,a7 ,aggregate foreign ep deficit 7i7 ,in general ,the term aggregate foreign ,e,p deficit means1 with respect to any ,united ,states shareholder1 the lesser of-- 7,i7 the aggregate of such shareholder's pro rata shares of the specified ,e,p deficits of the ,e,p deficit foreign corporations of such shareholder1 or 7,,ii7 the amount determined under paragraph 7#b77;,b74 7ii7 ,allocation of deficit ,if the amount described in clause 7i77,,ii7 is less than the amount described in clause 7i77,i71 then the shareholder shall designate1 in such form and manner as the ,secretary determines-- 7,i7 the amount of the specified ,e,p deficit which is to be taken into account for each ,e,p deficit corporation with respect to the taxpayer1 and 7,,ii7 in the case of an ,e,p deficit corporation which has a qualified deficit 7as defined in section #ieb71 the portion 7if any7 of the deficit taken into account under subclause 7,i7 which is attributable to a qualified deficit1 including the qualified activities to which such portion is attributable4 7,b7 ,ep 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 #i1 #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 ep 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 ,treatment of earnings and profits in future years 7,a7 ,reduced earnings and profits treated as previously taxed income when distributed ,for purposes of applying section #iei in any taxable year beginning after ,december #ca1 #bjag1 with respect to any ,united ,states shareholder of a deferred foreign income corporation1 an amount equal to such shareholder's reduction under paragraph 7#a7 which is allocated to such deferred foreign income corporation under this subsection shall be treated as an amount which was included in the gross income of such ,united ,states shareholder under section #iea7;a74 7,b7 ,ep deficits ,for purposes of this title1 a ,united ,states shareholder's pro rata share of the earnings and profits of any specified ,e,p deficit foreign corporation under this subsection shall be increased by the amount of the specified ,e,p deficit of such corporation taken into account by such shareholder under paragraph 7#a71 and1 for purposes of section #ieb1 such increase shall be attributable to the same activity to which the deficit so taken into account was attributable4 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 #he4g percent 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 #ga4d percent of so much of the amount described in subparagraph 7,a77ii7 as does not exceed the amount described in subparagraph 7,a77i74 7#b7 ,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 the greater 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 the close of the last taxable year of such specified foreign corporation which begins before ,january #a1 #bjah1 or 7ii7 one half of the sum of-- 7,i7 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 #i1 #bjag1 plus 7,,ii7 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 subclause 7,i74 7,b7 ,cash position ,for purposes of this paragraph1 the cash position of any specified foreign corporation is the sum of-- 7i7 cash and foreign currency 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 ,personal property which is of a type that is actively traded and for which there is an established financial market 7other than stock in the specified foreign corporation74 7,,ii7 ,commercial paper1 certificates of deposit1 the securities of the ,federal government and of any ,state or foreign government4 7,,iii7 ,any obligation with a term of less than one year4 7,,iv7 ,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 ,cash positions of a specified foreign corporation described in clause 7ii7 or 7iii77,,iii7 of subparagraph 7,b7 shall not be taken into account by a ,united ,states shareholder under subparagraph 7,a7 to the extent that such ,united ,states shareholder demonstrates to the satisfaction of the ,secretary that such amount is so taken into account by such ,united ,states shareholder with respect to another specified foreign corporation4 7,e7 ,cash positions of certain non-corporate entities taken into account ,an entity 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-- 7i7 such entity is a foreign entity which would be a specified foreign corporation of such ,united ,states shareholder if such entity were a corporation1 or 7ii7 any interest in such entity is held by a specified foreign corporation of such ,united ,states shareholder 7determined after application of clause 7i77 and such entity would be a specified foreign corporation of such ,united ,states shareholder if such entity were a foreign corporation4 7,f7 ,anti-abuse ,if the ,secretary determines that a 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 close of the taxable year referred to in subsection 7a77 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 in the case of a controlled foreign corporation1 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 #ihf1 and by only taking into account periods when the foreign corporation was a specified foreign corporation7 accumulated in taxable years beginning after ,december #ca1 #aihf1 and determined-- 7,a7 as of the date of the taxable year referred to in paragraph 7#a7 or 7#b7 of subsection 7a71 whichever is applicable with respect to such foreign corporation1 and 7,b7 without diminution by reason of dividends distributed during the taxable year ending with or including such date4 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 section #ijb corporation 7as defined in section #iji7;d77#e7 as in effect before the date of the enactment of the ,tax ,cuts and ,jobs ,act74 7#b7 ,application to section #ijb corporations ,for purposes of sections #iea and #ifa1 a section #ijb corporation 7as so defined7 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 7e774 7#c7 ,exclusion of passive foreign investment companies ,such term shall not include any corporation which is a passive foreign investment company 7as defined in section #abig7 with respect to the shareholder and which 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 #j4heg multiplied by 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 #j4gad multiplied by 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 ,section #gh shall not apply to any tax for which credit is not allowable under section #ija by reason of paragraph 7#a74 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 installments of the following amounts3 7,a7 #h percent of the net tax liability in the case of each of the first #e of such installments1 7,b7 #ae percent of the net tax liability in the case of the #fth such installment1 7,c7 #bj percent of the net tax liability in the case of the #gth such installment1 and 7,d7 #be percent of the net tax liability in the case of the #hth such installment4 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 shall 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 income or deduction 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 of tax 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 of subparagraph 7,a7 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 ,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 shall provide4 7j7 ,reporting by ,s corporation ,each ,s corporation which is a ,united ,states shareholder of a specified foreign 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 7b74 ,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 ,extension of limitation on assessment ,notwithstanding section #feja1 the limitation on the time period for the assessment of the net tax liability under this section 7as defined in subsection 7h77#f77 shall not expire before the date that is #f years after the return for the taxable year described in such subsection was filed4 7l7 ,recapture for expatriated entities 7#a7 ,in general ,if a deduction is allowed under subsection 7c7 to a ,united ,states shareholder and such shareholder first becomes an expatriated entity at any time during the #aj-year period beginning on the date of the enactment of the ,tax ,cuts and ,jobs ,act1 then-- 7,a7 the tax imposed by this chapter shall be increased for the first taxable year in which such taxpayer becomes an expatriated entity by an amount equal to #ce percent of the amount of the deduction allowed to the specified foreign corporation under subsection 7c71 and 7,b7 no credits shall be allowed against the increase in tax under subparagraph 7,a74 7#b7 ,expatriated entity ,for purposes of this subsection1 the term expatriated entity has the same meaning given such term under section #ghgd7;a77#b71 except that such term shall not include an entity if the surrogate foreign corporation with respect to the entity is treated as a domestic corporation under section #ghgd7;b74 7m7 ,special rules for ,united ,states shareholders which are real estate investment trusts 7#a7 ,in general ,if a real estate investment trust is a ,united ,states shareholder in #a or more deferred foreign income corporations-- 7,a7 any amount required to be taken into account under section #iea7;a77#a7 by reason of this section shall not be taken into account as gross income of the real estate investment trust for purposes of applying paragraphs 7#b7 and 7#c7 of section #hef7;c7 to any taxable year for which such amount is taken into account under section #iea7;a77#a71 and 7,b7 if the real estate investment trust elects the application of this subparagraph1 notwithstanding subsection 7a71 any amount required to be taken into account under section #iea7;a77#a7 by reason of this section shall1 in lieu of the taxable year in which it would otherwise be included in gross income 7for purposes of the computation of real estate investment trust taxable income under section #heg7;b771 be included in gross income as follows3 7i7 #h percent of such amount in the case of each of the taxable years in the #e-taxable year period beginning with the taxable year in which such amount would otherwise be included4 7ii7 #ae percent of such amount in the case of the #ast taxable year following such period4 7iii7 #bj percent of such amount in the case of the #bnd taxable year following such period4 7iv7 #be percent of such amount in the case of the #crd taxable year following such period4 7#b7 ,rules for trusts electing deferred inclusion 7,a7 ,election ,any election under paragraph 7#a77;,b7 shall be made not later than the due date for the first taxable year in the #e-taxable year period described in clause 7i7 of paragraph 7#a77;,b7 and shall be made in such manner as the ,secretary shall provide4 7,b7 ,special rules ,if an election under paragraph 7#a77;,b7 is in effect with respect to any real estate investment trust1 the following rules shall apply3 7i7 ,application of participation exemption ,for purposes of subsection 7c77#a7-- 7,i7 the aggregate amount to which subparagraph 7,a7 or 7,b7 of subsection 7c77#a7 applies shall be determined without regard to the election1 7,,ii7 each such aggregate amount shall be allocated to each taxable year described in paragraph 7#a77;,b7 in the same proportion as the amount included in the gross income of such ,united ,states shareholder under section #iea7;a77#a7 by reason of this section is allocated to each such taxable year4 7,,iii7 ,no installment payments ,the real estate investment trust may not make an election under subsection 7g7 for any taxable year described in paragraph 7#a77;,b74 7ii7 ,acceleration of inclusion ,if there is a liquidation or sale of substantially all the assets of the real estate investment trust 7including in a title #aa or similar case71 a cessation of business by such trust1 or any similar circumstance1 then any amount not yet included in gross income under paragraph 7#a77;,b7 shall be included in gross income as of the day before the date of the event and the unpaid portion of any tax liability with respect to such inclusion 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 7n7 ,election not to apply net operating loss deduction 7#a7 ,in general ,if a ,united ,states shareholder of a deferred foreign income corporation elects the application of this subsection for the taxable year described in subsection 7a71 then the amount described in paragraph 7#b7 shall not be taken into account-- 7,a7 in determining the amount of the net operating loss deduction under section #agb of such shareholder for such taxable year1 or 7,b7 in determining the amount of taxable income for such taxable year which may be reduced by net operating loss carryovers or carrybacks to such taxable year under section #agb4 7#b7 ,amount described ,the amount described in this paragraph is the sum of-- 7,a7 the amount required to be taken into account under section #iea7;a77#a7 by reason of this section 7determined after the application of subsection 7c771 plus 7,b7 in the case of a domestic corporation which chooses to have the benefits of subpart ,a of part ,,iii of subchapter ,n for the taxable year1 the taxes deemed to be paid by such corporation under subsections 7a7 and 7b7 of section #ifj for such taxable year with respect to the amount described in subparagraph 7,a7 which are treated as a dividends under section #gh4 7#c7 ,election ,any election under this subsection shall be made not later than the due date 7including extensions7 for filing the return of tax for the taxable year and shall be made in such manner as the ,secretary shall prescribe4 7o7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section or to prevent the avoidance of the purposes of this section1 including through a reduction in earnings and profits through changes in entity classification1 changes in accounting methods1 or otherwise4 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 ,rules related to passive and mobile income #a ,taxation of foreign-derived intangible income and global intangible low-taxed income #adbja4 ,current year inclusion of global intangible low-taxed income by ,united ,states shareholders 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 ,global intangible low-taxed income 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 such shareholder's global intangible low-taxed income for such taxable year4 7b7 ,global intangible low-taxed income ,for purposes of this section-- 7#a7 ,in general ,the term global intangible low-taxed 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 such shareholder's net ,,cfc tested income for such taxable year1 over 7,b7 such shareholder's net deemed tangible income return for such taxable year4 7#b7 ,net deemed tangible income return ,the term net deemed tangible income return means1 with respect to any ,united ,states shareholder for any taxable year1 an amount equal to #aj percent 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 shareholder74 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 described in section #ieb7;b71 7,,ii7 any gross income taken into account in determining the subpart ,f income of such corporation1 7,,iii7 any gross income excluded from the foreign base company income 7as defined in section #ied7 and the insurance income 7as defined in section #iec7 of such corporation by reason of section #ied7;b77#d71 7,,iv7 any dividend received from a related person 7as defined in section #ied7;d77#c771 and 7,v7 any foreign oil and gas extraction income 7as defined in section #ijg7;c77#a77 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#e74 7,b7 ,tested loss 7i7 ,in general ,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 7ii7 ,coordination with subpart ,f to deny double benefit of losses ,section #ieb7;c77#a77;,a7 shall be applied by increasing the earnings and profits of the controlled foreign corporation by the tested loss of such corporation4 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 corporation for any taxable year of such controlled foreign corporation1 the average of the aggregate of the corporation's adjusted bases as of the close of each quarter of such taxable year 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 #afg4 7#b7 ,specified tangible property 7,a7 ,in general ,the term specified tangible property means1 except as provided in subparagraph 7,b71 any tangible property used in the production of tested income4 7,b7 ,dual use property ,in the case of property used both in the production of tested income and income which is not tested income1 such property shall be treated as specified tangible property in the same proportion that the gross income described in subsection 7c77#a77;,a7 produced with respect to such property bears to the total gross income produced with respect to such property4 7#c7 ,determination of adjusted basis ,for purposes of this subsection1 notwithstanding any provision of this title 7or any other provision of law7 which is enacted after the date of the enactment of this section1 the adjusted basis in any property shall be determined using the alternative depreciation system under section #afh7;g74 7#d7 ,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 ,determination of pro rata share1 etc ,for purposes of this section-- 7#a7 ,in general ,the pro rata shares referred to in subsections 7b71 7c77#a77;,a71 and 7c77#a77;,b71 respectively1 shall be determined under the rules of section #iea7;a77#b7 in the same manner as such section applies to subpart ,f income and shall be taken into account in the taxable year of the ,united ,states shareholder in which or with which the taxable year of the controlled foreign corporation ends4 7#b7 ,treatment as ,united ,states shareholder ,for purposes of paragraph 7#a71 a person shall be treated as a ,united ,states shareholder of a controlled foreign corporation for any taxable year only if such person owns 7within the meaning of section #ieh7;a77 stock in such foreign corporation on the last day1 in such year1 on which such foreign corporation is a controlled foreign corporation4 7#c7 ,treatment as controlled foreign corporation ,a foreign corporation shall be treated as a controlled foreign corporation for any taxable year if such foreign corporation is a controlled foreign corporation at any time during such taxable year4 7f7 ,treatment as subpart ,f income for certain purposes 7#a7 ,in general 7,a7 ,application ,except as provided in subparagraph 7,b71 any global intangible low-taxed income 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 #ifb7;c71 #ifb7;d71 #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 ,exception ,the ,secretary shall provide rules for the application of subparagraph 7,a7 to other provisions of this title in any case in which the determination of subpart ,f income is required to be made at the level of the controlled foreign corporation4 7#b7 ,allocation of global intangible low-taxed income 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 global intangible low-taxed income included in gross income of a ,united ,states shareholder under subsection 7a71 the portion of such global intangible low-taxed income which is treated as being with respect to such controlled foreign corporation is-- 7,a7 in the case of a controlled foreign corporation with no tested income1 zero1 and 7,b7 in the case of a controlled foreign corporation with tested income1 the portion of such global intangible low-taxed income which bears the same ratio to such global intangible low-taxed income 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 described in subsection 7c77#a77;,a7 with respect to such ,united ,states shareholder4 4 7b7 ,foreign tax credit 7#a7 ,application of deemed paid foreign tax credit ,section #ifj is amended adding at the end 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 the product of-- 7,a7 such domestic corporation's inclusion percentage1 multiplied by 7,b7 the aggregate tested foreign income taxes paid or accrued by controlled foreign corporations4 7#b7 ,inclusion percentage ,for purposes of paragraph 7#a71 the term inclusion percentage means1 with respect to any domestic corporation1 the ratio 7expressed as a percentage7 of-- 7,a7 such corporation's global intangible low-taxed income 7as defined in section #iea;,a7b771 divided by 7,b7 the aggregate amount described in 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 the tested income of such foreign corporation taken into account by such domestic corporation under section #iea;,a4 4 7#b7 ,application of foreign tax credit limitation 7,a7 ,separate basket for global intangible low-taxed income ,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;,a 7other than passive category income71 4 7,b7 ,exclusion from general category income ,section #ijd7;d77#b77;,a77ii7 is amended by inserting income described in paragraph 7#a77;,a7 and before passive category income4 7,c7 ,no carryover or carryback 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;,a744 7c7 ,clerical amendment ,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 ,global intangible low-taxed income 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 #adbjb4 ,deduction for foreign-derived intangible income and global intangible low-taxed income 7a7 ,in general ,part ,,viii of subchapter ,b of chapter #a is amended by adding at the end the following new section3 #bej4 ,foreign-derived intangible income and global intangible low-taxed income 7a7 ,allowance of deduction 7#a7 ,in general ,in the case of a domestic corporation for any taxable year1 there shall be allowed as a deduction an amount equal to the sum of-- 7,a7 #cg4e percent of the foreign-derived intangible income of such domestic corporation for such taxable year1 plus 7,b7 #ej percent of the global intangible low-taxed income amount 7if any7 which is included in the gross income of such domestic corporation under section #iea;,a for such taxable year4 7#b7 ,limitation based on taxable income 7,a7 ,in general ,if1 for any taxable year-- 7i7 the sum of the foreign-derived intangible income and the global intangible low-taxed income amount otherwise taken into account by the domestic corporation under paragraph 7#a71 exceeds 7ii7 the taxable income of the domestic corporation 7determined without regard to this section71 then the amount of the foreign-derived intangible income and the global intangible low-taxed income amount so taken into account shall be reduced as provided in subparagraph 7,b74 7,b7 ,reduction ,for purposes of subparagraph 7,a7-- 7i7 foreign-derived intangible income shall be reduced by an amount which bears the same ratio to the excess described in subparagraph 7,a7 as such foreign-derived intangible income bears to the sum described in subparagraph 7,a77i71 and 7ii7 the global intangible low-taxed income amount shall be reduced by the remainder of such excess4 7#c7 ,reduction in deduction for taxable years after #bjbe ,in the case of any taxable year beginning after ,december #ca1 #bjbe1 paragraph 7#a7 shall be applied by substituting-- 7,a7 #ba4hge percent for #cg4e percent in subparagraph 7,a71 and 7,b7 #cg4e percent for #ej percent in subparagraph 7,b74 7b7 ,foreign-derived intangible income ,for purposes of this section-- 7#a7 ,in general ,the foreign-derived intangible income of any domestic corporation is the amount which bears the same ratio to the deemed intangible income of such corporation as-- 7,a7 the foreign-derived deduction eligible income of such corporation1 bears to 7,b7 the deduction eligible income of such corporation4 7#b7 ,deemed intangible income ,for purposes of this subsection-- 7,a7 ,in general ,the term deemed intangible income means the excess 7if any7 of-- 7i7 the deduction eligible income of the domestic corporation1 over 7ii7 the deemed tangible income return of the corporation4 7,b7 ,deemed tangible income return ,the term deemed tangible income return means1 with respect to any corporation1 an amount equal to #aj percent of the corporation's qualified business asset investment 7as defined in section #iea;,a7d71 determined by substituting deduction eligible income for tested income in paragraph 7#b7 thereof74 7#c7 ,deduction eligible income 7,a7 ,in general ,the term deduction eligible income means1 with respect to any domestic corporation1 the excess 7if any7 of-- 7i7 gross income of such corporation determined without regard to-- 7,i7 the subpart ,f income of such corporation determined under section #iea1 7,,ii7 the global intangible low-taxed income determined under section #iea;,a1 7,,iii7 any financial services income 7as defined in section #ijd7;d77#b77;,d77 of such corporation which is not described in clause 7ii71 7,,iv7 any dividend received from a corporation which is a controlled foreign corporation of such domestic corporation1 7,v7 any domestic oil and gas extraction income of such corporation1 and 7,,vi7 any foreign branch income 7as defined in section #ijd7;d77#b77;,j771 over 7ii7 the deductions 7including taxes7 properly allocable to such gross income under rules similar to the rules of section #ied7;b77#e74 7,b7 ,domestic oil and gas extraction income ,for purposes of subparagraph 7,a71 the term domestic oil and gas extraction income means income described in section #ijg7;c77#a71 determined by substituting within the ,united ,states for without the ,united ,states4 7#d7 ,foreign-derived deduction eligible income ,the term foreign-derived deduction eligible income means1 with respect to any taxpayer for any taxable year1 any deduction eligible income of such taxpayer which is derived in connection with-- 7,a7 property-- 7i7 which is sold by the taxpayer to any person who is not a ,united ,states person1 and 7ii7 which the taxpayer establishes to the satisfaction of the ,secretary is for a foreign use1 or 7,b7 services provided by the taxpayer which the taxpayer establishes to the satisfaction of the ,secretary are provided to any person1 or with respect to property1 not located within the ,united ,states4 7#e7 ,rules relating to foreign use property or services ,for purposes of this subsection-- 7,a7 ,foreign use ,the term foreign use means any use1 consumption1 or disposition which is not within the ,united ,states4 7,b7 ,property or services provided to domestic intermediaries 7i7 ,property ,if a taxpayer sells property to another person 7other than a related party7 for further manufacture or other modification within the ,united ,states1 such property shall not be treated as sold for a foreign use even if such other person subsequently uses such property for a foreign use4 7ii7 ,services ,if a taxpayer provides services to another person 7other than a related party7 located within the ,united ,states1 such services shall not be treated as described in paragraph 7#d77;,b7 even if such other person uses such services in providing services which are so described4 7,c7 ,special rules with respect to related party transactions 7i7 ,sales to related parties ,if property is sold to a related party who is not a ,united ,states person1 such sale shall not be treated as for a foreign use unless such property is sold by the related party to another person who is an unrelated party who is not a ,united ,states person and the taxpayer establishes to the satisfaction of the ,secretary that such property is for a foreign use4 7ii7 ,service provided to related parties ,if a service is provided to a related party who is not located in the ,united ,states1 such service shall be not be treated described in subparagraph 7,a77ii7 unless the taxpayer established to the satisfaction of the ,secretary that such service is not substantially similar to services provided by such related party to persons located within the ,united ,states4 7,d7 ,related party ,for purposes of this paragraph1 the term related party means any member of 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 ,any person 7other than a corporation7 shall be treated as a member of such group if such person is controlled by members of such group 7including any entity treated as a member of such group by reason of this sentence7 or controls any such member4 ,for purposes of the preceding sentence1 control shall be determined under the rules of section #ied7;d77#c74 7,e7 ,sold ,for purposes of this subsection1 the terms sold1 sells1 and sale shall include any lease1 license1 exchange1 or other disposition4 7c7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section4 4 7b7 ,conforming amendments 7#a7 ,section #agb7;d71 as amended by section #acjaa1 is amended by adding at the end the following new paragraph3 7#aj7 ,deduction for foreign-derived intangible income ,the deduction under section #bej shall not be allowed4 4 7#b7 ,section #bdf7;b77#a7 is amended-- 7,a7 by striking and subsection 7a7 and 7b7 of section #bde the first place it appears and inserting 1 subsection 7a7 and 7b7 of section #bde1 and section #bej1 7,b7 by striking and subsection 7a7 and 7b7 of section #bde the second place it appears and inserting subsection 7a7 and 7b7 of section #bde1 and #bej4 7#c7 ,section #dfi7;i77#c77;,f77iii7 is amended by striking and #bbb and inserting #bbb1 and #bej4 7#d7 ,the table of sections for part ,,viii of subchapter ,b of chapter #a is amended by adding at the end the following new item3 ,sec4 #bej4 ,foreign-derived intangible income and global intangible low-taxed income4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #adbjc4 ,special rules for transfers of intangible property from controlled foreign corporations to ,united ,states shareholders 7a7 ,in general ,subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by adding at the end the following new section3 #iff4 ,transfers of intangible property to ,united ,states shareholders 7a7 ,in general ,in the case of any distribution of intangible property which is held by a controlled foreign corporation on the date of enactment of this section and which is described in subsection 7b7-- 7#a7 for purposes of part ,i of subchapter ,c and any other provision of this title specified by the ,secretary1 the fair market value of such property on the date of such distribution shall be treated as not exceeding the adjusted basis of such property immediately before such distribution1 and 7#b7 if the distribution is to a ,united ,states shareholder and is not a dividend-- 7,a7 the ,united ,states shareholder's adjusted basis in the stock of the controlled foreign corporation with respect to which such distribution is made shall be increased by the amount 7if any7 of such distribution which would 7but for this subsection7 be includible in gross income1 and 7,b7 the adjusted basis of such property in the hands of such ,united ,states shareholder immediately after such distribution shall be such adjusted basis immediately before such distribution reduced by the amount of the increase described in subparagraph 7,a74 7b7 ,distribution ,a distribution is described in this section if the distribution is-- 7#a7 received by a domestic corporation from a controlled foreign corporation with respect to which such corporation is a ,united ,states shareholder1 and 7#b7 made by the controlled foreign corporation before the last day of the third taxable year of the controlled foreign corporation beginning after ,december #ca1 #bjag4 7c7 ,intangible property ,for purposes of this subsection1 the term intangible property has the meaning given such term by section #icf7;h77#c77;,b7 or which is computer software described in section #aig7;e77#c77;,b74 4 7b7 ,conforming amendments 7#a7 ,section #aig7;f77#b77;,b77i7 is amended by inserting #iff7;a71 after #gca14 7#b7 ,the table of sections for subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by adding at the end the following new item3 ,sec4 #iff4 ,transfers of intangible property to ,united ,states shareholders4 4 7c7 ,effective date ,the amendments made by this section shall apply to distributions made in 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 #b ,other modifications of subpart ,f provisions #adbaa4 ,elimination of inclusion of foreign base company oil related income 7a7 ,repeal ,subsection 7a7 of section #ied is amended-- 7#a7 by inserting and at the end of paragraph 7#b71 7#b7 by striking the comma at the end of paragraph 7#c7 and inserting a period1 and 7#c7 by striking paragraph 7#e74 7b7 ,conforming amendments 7#a7 ,section #ieb7;c77#a77;,b77iii7 is amended by striking subclause 7,i7 and redesignating subclauses 7,,ii7 through 7,v7 as subclauses 7,i7 through 7,,iv71 respectively4 7#b7 ,section #ied7;b7 is amended-- 7,a7 by striking the second sentence of paragraph 7#d71 7,b7 by striking the foreign base company services income1 and the foreign base company oil related income in paragraph 7#e7 and inserting and the foreign base company services income1 and 7,c7 by striking paragraph 7#f74 7#c7 ,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 with or within which such taxable years of foreign corporations end4 #adbab4 ,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;f77#c7 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 #adbac4 ,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;b7 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 #adbad4 ,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 ,effective date ,the amendments made by this section shall apply to-- 7#a7 the last taxable year of foreign corporations beginning before ,january #a1 #bjah1 and each subsequent taxable year of such foreign corporations1 and 7#b7 taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #adbae4 ,modification of definition of ,united ,states shareholder 7a7 ,in general ,section #iea7;b7 is amended by inserting 1 or #aj percent or more of the total value of shares of all classes of stock of such foreign corporation after such foreign corporation4 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 #adbaf4 ,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 #adbag4 ,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 #bjag1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #adbah4 ,corporations eligible for deduction for dividends from controlled foreign corporations exempt from subpart ,f inclusion for investment in ,united ,states property 7a7 ,in general ,section #ief7;a7 is amended by inserting 7other than a corporation7 after ,united ,states shareholder in the matter preceding paragraph 7#a74 7b7 ,effective date ,the amendment made by this section shall apply to taxable years of controlled foreign corporations ending after ,december #ca1 #bjag1 and to taxable years of ,united ,states shareholders with or within which such taxable years of controlled foreign corporations end4 #c ,prevention of base erosion #adbba4 ,denial of deduction for interest expense of ,united ,states shareholders which are members of worldwide affiliated groups with excess domestic indebtedness 7a7 ,in general ,section #afc is amended by redesignating subsection 7n7 as subsection 7o7 and by inserting after subsection 7m7 the following new subsection3 7n7 ,disallowance of deduction for interest expense of ,united ,states shareholders which are members of worldwide affiliated groups with excess domestic indebtedness 7#a7 ,in general ,in the case of any domestic corporation which is a member of a worldwide affiliated group1 the deduction allowed under this chapter for interest paid or accrued by such domestic corporation during the taxable year shall be reduced by the product of-- 7,a7 the net interest expense of such domestic corporation1 multiplied by 7,b7 the debt-to-equity differential percentage of such worldwide affiliated group4 7#b7 ,carryforward ,any amount disallowed under paragraph 7#a7 for any taxable year shall be treated as interest paid or accrued in the succeeding taxable year4 7#c7 ,debt-to-equity differential percentage 7,a7 ,in general ,for purposes of this subsection1 the term debt-to-equity differential percentage means1 with respect to any worldwide affiliated group1 the percentage which the excess domestic indebtedness of such group bears to the total indebtedness of the domestic corporations which are members of such group4 7,b7 ,excess domestic indebtedness ,for purposes of subparagraph 7,a71 the term excess domestic indebtedness means1 with respect to any worldwide affiliated group1 the excess 7if any7 of-- 7i7 the total indebtedness of the domestic corporations which are members of such group1 over 7ii7 #aaj percent of the amount which the total indebtedness of such domestic corporations would be if the ratio of such indebtedness to the total equity of such domestic corporations equaled the ratio which-- 7,i7 the total indebtedness of such group1 bears to 7,,ii7 the total equity of such group4 7,c7 ,total equity ,for purposes of subparagraph 7,b71 the term total equity means1 with respect to one or more corporations1 the excess 7if any7 of-- 7i7 the money and all other assets of such corporations1 over 7ii7 the total indebtedness of such corporations4 7,d7 ,special rules for determining debt and equity 7i7 ,in general ,for purposes of this paragraph-- 7,i7 the amount taken into account with respect to any asset shall be the adjusted basis thereof for purposes of determining gain1 7,,ii7 the amount taken into account with respect to any indebtedness with original issue discount shall be its issue price plus the portion of the original issue discount previously accrued as determined under the rules of section #abgb 7determined without regard to subsection 7a77#g7 or 7b77#d7 thereof71 and 7,,iii7 there shall be such other adjustments as the ,secretary shall by regulations prescribe4 7ii7 ,intragroup debt and equity interests disregarded ,for purposes of this paragraph1 the total indebtedness1 and the assets1 of any group of corporations shall be determined by treating all members of such group as one corporation4 7iii7 ,determination of assets of domestic group ,for purposes of this paragraph1 the assets of the domestic corporations which are members of any worldwide affiliated group shall be determined by disregarding any interest held by any such domestic corporation in any foreign corporation which is a member of such group4 7#d7 ,other definitions ,for purposes of this subsection-- 7,a7 ,worldwide affiliated group ,the term worldwide affiliated group means a group consisting of the includible members of an affiliated group1 as defined in section #aejd7;a71 determined-- 7i7 by substituting more than #ej percent for at least #hj percent each place it appears in such section1 and 7ii7 without regard to paragraphs 7#b71 7#c71 and 7#d7 of section #aejd7;b74 7,b7 ,net interest expense ,the term net interest expense means the excess 7if any7 of 7i7 the interest paid or accrued by the taxpayer during the taxable year1 over 7ii7 the amount of interest includible in the gross income of such taxpayer for such taxable year4 ,the ,secretary shall by regulations provide for adjustments in determining the amount of net interest expense if necessary4 7#e7 ,treatment of affiliated group ,for purposes of this subsection1 all members of the same affiliated group 7within the meaning of section #aejd7;a7 applied by substituting more than #ej percent for at least #hj percent each place it appears7 shall be treated as one taxpayer4 7#f7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be appropriate to carry out the purposes of this subsection1 including regulations or other guidance-- 7,a7 to prevent the avoidance of the purposes of this subsection1 7,b7 providing such adjustments in the case of corporations which are members of an affiliated group as may be appropriate to carry out the purposes of this subsection1 7,c7 providing for the coordination of this subsection with section #hhd1 7,d7 providing for the reallocation of shares of partnership indebtedness1 or distributive shares of the partnership's interest income or interest expense1 and 7,e7 providing for the coordination with the limitation under subsection 7j74 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #adbbb4 ,limitations on income shifting through intangible property transfers 7a7 ,definition of intangible asset ,section #icf7;h77#c77;,b7 is amended-- 7#a7 by striking or at the end of clause 7v71 7#b7 by striking clause 7vi7 and inserting the following3 7vi7 any goodwill1 going concern value1 or workforce in place 7including its composition and terms and conditions 7contractual or otherwise7 of its employment72 or 7vii7 any other item the value or potential value of which is not attributable to tangible property or the services of any individual4 1 and 7#c7 by striking the flush language after clause 7vii71 as added by paragraph 7#b74 7b7 ,clarification of allowable valuation methods 7#a7 ,foreign corporations ,section #cfg7;d77#b7 is amended by adding at the end the following new subparagraph3 7,d7 ,regulatory authority ,for purposes of the last sentence of subparagraph 7,a71 the ,secretary shall require-- 7i7 the valuation of transfers of intangible property1 including intangible property transferred with other property or services1 on an aggregate basis1 or 7ii7 the valuation of such a transfer on the basis of the realistic alternatives to such a transfer1 if the ,secretary determines that such basis is the most reliable means of valuation of such transfers4 4 7#b7 ,allocation among taxpayers ,section #dhb is amended by adding at the end the following3 ,for purposes of this section1 the ,secretary shall require the valuation of transfers of intangible property 7including intangible property transferred with other property or services7 on an aggregate basis or the valuation of such a transfer on the basis of the realistic alternatives to such a transfer1 if the ,secretary determines that such basis is the most reliable means of valuation of such transfers44 7c7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to transfers in taxable years beginning after ,december #ca1 #bjag4 7#b7 ,no inference ,nothing in the amendment made by subsection 7a7 shall be construed to create any inference with respect to the application of section #icf7;h77#c7 of the ,internal ,revenue ,code of #aihf1 or the authority of the ,secretary of the ,treasury to provide regulations for such application1 with respect to taxable years beginning before ,january #a1 #bjah4 #adbbc4 ,certain related party amounts paid or accrued in hybrid transactions or with hybrid entities 7a7 ,in general ,part ,,ix of subchapter ,b of chapter #a is amended by inserting after section #bfg the following3 #bfg;,a4 ,certain related party amounts paid or accrued in hybrid transactions or with hybrid entities 7a7 ,in general ,no deduction shall be allowed under this chapter for any disqualified related party amount paid or accrued pursuant to a hybrid transaction or by1 or to1 a hybrid entity4 7b7 ,disqualified related party amount ,for purposes of this section-- 7#a7 ,disqualified related party amount ,the term disqualified related party amount means any interest or royalty paid or accrued to a related party to the extent that-- 7,a7 such amount is not included in the income of such related party under the tax law of the country of which such related party is a resident for tax purposes or is subject to tax1 or 7,b7 such related party is allowed a deduction with respect to such amount under the tax law of such country4 ,such term shall not include any payment to the extent such payment is included in the gross income of a ,united ,states shareholder under section #iea7;a74 7#b7 ,related party ,the term related party means a related person as defined in section #ied7;d77#c71 except that such section shall be applied with respect to the person making the payment described in paragraph 7#a7 in lieu of the controlled foreign corporation otherwise referred to in such section4 7c7 ,hybrid transaction ,for purposes of this section1 the term hybrid transaction means any transaction1 series of transactions1 agreement1 or instrument one or more payments with respect to which are treated as interest or royalties for purposes of this chapter and which are not so treated for purposes the tax law of the foreign country of which the recipient of such payment is resident for tax purposes or is subject to tax4 7d7 ,hybrid entity ,for purposes of this section1 the term hybrid entity means any entity which is either-- 7#a7 treated as fiscally transparent for purposes of this chapter but not so treated for purposes of the tax law of the foreign country of which the entity is resident for tax purposes or is subject to tax1 or 7#b7 treated as fiscally transparent for purposes of such tax law but not so treated for purposes of this chapter4 7e7 ,regulations ,the ,secretary shall 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 providing for-- 7#a7 rules for treating certain conduit arrangements which involve a hybrid transaction or a hybrid entity as subject to subsection 7a71 7#b7 rules for the application of this section to foreign branches1 7#c7 rules for treating certain structured transactions as subject to subsection 7a71 7#d7 rules for treating a tax preference as an exclusion from income for purposes of applying subsection 7b77#a7 if such tax preference has the effect of reducing the generally applicable statutory rate by #be percent or more1 7#e7 rules for treating the entire amount of interest or royalty paid or accrued to a related party as a disqualified related party amount if such amount is subject to a participation exemption system or other system which provides for the exclusion or deduction of a substantial portion of such amount1 7#f7 rules for determining the tax residence of a foreign entity if the entity is otherwise considered a resident of more than one country or of no country1 7#g7 exceptions from subsection 7a7 with respect to-- 7,a7 cases in which the disqualified related party amount is taxed under the laws of a foreign country other than the country of which the related party is a resident for tax purposes1 and 7,b7 other cases which the ,secretary determines do not present a risk of eroding the ,federal tax base1 7#h7 requirements for record keeping and information reporting in addition to any requirements imposed by section #fjch;,a4 4 7b7 ,conforming amendment ,the table of sections for part ,,ix of subchapter ,b of chapter #a is amended by inserting after the item relating to section #bfg the following new item3 ,sec4 #bfg;,a4 ,certain related party amounts paid or accrued in hybrid transactions or with hybrid entities4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #adbbd4 ,termination of special rules for domestic international sales corporations 7a7 ,in general ,part ,,iv of subchapter ,n of chapter #a 7relating to domestic international sales corporations7 is amended by adding at the end the following new subpart3 ,c ,termination ,sec4 #iih4 ,termination of domestic international sales corporation provisions4 #iih4 ,termination of domestic international sales corporation provisions 7a7 ,termination of election ,any election under section #iib7;b7 in effect for a corporation's last taxable year beginning in #bjah shall be terminated effective for such corporation's next succeeding taxable year4 7b7 ,no new election ,no election may be made under section #iib7;b7 for any taxable year beginning after ,december #ca1 #bjah4 7c7 ,effect of termination ,a shareholder of a corporation whose election is terminated by reason of subsection 7a7 shall be deemed to have received a distribution to which section #iie7;b77#b7 applies for the first taxable year for which the termination is effective4 ,such distribution 7or any actual distribution after termination to the extent paid out of the corporation's accumulated ,,disc income7 shall not be treated as qualified dividend income 7within the meaning of section #a7;h77#aa77;,b774 4 7b7 ,conforming amendment ,the table of contents for part ,,iv of subchapter ,n of chapter #a is amended by adding at the end the following new item3 ,subpart ,c--,termination 4 #adbbe4 ,shareholders of surrogate foreign corporations not eligible for reduced rate on dividends 7a7 ,in general ,section #a7;h77#aa77;,c77iii7 is amended-- 7#a7 by striking shall not include any foreign corporation and inserting shall not include-- 7,i7 any foreign corporation 1 7#b7 by striking the period at the end and inserting 1 and1 and 7#c7 by adding at the end the following new subclause3 7,,ii7 any corporation which is a surrogate foreign corporation 7as defined in section #ghgd7;a77#b77;,b77 other than a foreign corporation which is treated as a domestic corporation under section #ghgd7;b74 4 7b7 ,effective date ,the amendments made by this section shall apply to dividends paid in taxable years beginning after ,december #ca1 #bjag4 ,c ,modifications related to foreign tax credit system #adcja4 ,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 #ifj1 as amended by section #adbja1 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 any prior taxable year4 1 7#b7 and by adding after subsection 7d7 7as added by section #adbja7 the following new subsections3 7e7 ,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 7f7 ,regulations ,the ,secretary shall 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 #gh1 as amended by section #adbja1 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 year-- 7#a7 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 section #ifj7 as an item of income required to be included in the gross income of such domestic corporation under section #iea7;a71 and 7#b7 an amount equal to the aggregate tested foreign income taxes deemed paid by such corporation under section #ifj7;d7 7determined without regard to the phrase #hj percent of in paragraph 7#a7 thereof7 shall be treated for purposes of this title 7other than section #ifj7 as an addition to the global intangible low-taxed income of such domestic corporation under section #iea;,a7a7 for such taxable year4 4 7#b7 ,paragraph 7#d7 of section #bde7;a7 is amended to read as follows3 7#d7 ,post-#aihf undistributed earnings ,the term post-#aihf undistributed earnings means the amount of 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 #aihf-- 7,a7 as of the close of the taxable year of the foreign corporation in which the dividend is distributed1 and 7,b7 without diminution by reason of dividends distributed during such taxable year4 4 7#c7 ,section #bde7;a77#aj77;,c7 is amended by striking #ijb1 #ijg1 and #ifj and inserting #ijg and #ifj4 7#d7 ,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#e7 ,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#f7 ,section #hfe7;h77#a77;,b7 is amended by striking #ijb1 #ijg1 and inserting #ijg4 7#g7 ,section #ija7;a7 is amended by striking sections #ijb and #ifj and inserting section #ifj4 7#h7 ,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 to that portion4 7#i7 ,section #ija7;f7 is amended by striking sections #ijb and #ifj and inserting section #ifj4 7#aj7 ,section #ija7;j77#a77;,a7 is amended by striking #ijb or4 7#aa7 ,section #ija7;j77#a77;,b7 is amended by striking sections #ijb and #ifj and inserting section #ifj4 7#ab7 ,section #ija7k77#b7 is amended by striking 1 #ijb14 7#ac7 ,section #ija7k77#f7 is amended by striking #ijb or4 7#ad7 ,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#ae7 ,section #ijd7;d77#f77;,a7 is amended by striking #ijb1 #ijg1 and inserting #ijg4 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 #ijd7k7 is amended to read as follows3 7k7 ,cross references ,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;c74 4 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 specified #aj-percent owned foreign corporation 7as defined in section #bde;,a7b771 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 specified #aj-percent owned foreign corporation or a domestic corporation which is a ,united ,states shareholder with respect to such specified #aj-percent owned foreign corporation41 and 7,d7 by striking section #ijb corporations in the heading thereof and inserting specified #aj-percent owned foreign corporations4 7#bh7 ,section #iji7;d7 is amended by striking paragraph 7#e74 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 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 #adcjb4 ,separate foreign tax credit limitation basket for foreign branch income 7a7 ,in general ,section #ijd7;d77#a71 as amended by section #adbja1 is amended by redesignating subparagraphs 7,b7 and 7,c7 as subparagraphs 7,c7 and 7,d71 respectively1 and by inserting after subparagraph 7,a7 the following new subparagraph3 7,b7 foreign branch income1 4 7b7 ,foreign branch income 7#a7 ,in general ,section #ijd7;d77#b7 is amended by inserting after subparagraph 7,i7 the following new subparagraph3 7,j7 ,foreign branch income 7i7 ,in general ,the term foreign branch income means the business profits of such ,united ,states person which are attributable to #a or more qualified business units 7as defined in section #ihi7;a77 in #a or more foreign countries4 ,for purposes of the preceding sentence1 the amount of business profits attributable to a qualified business unit shall be determined under rules established by the ,secretary4 7ii7 ,exception ,such term shall not include any income which is passive category income4 4 7#b7 ,conforming amendment ,section #ijd7;d77#b77;,a77ii71 as amended by section #adbja1 is amended by striking income described in paragraph 7#a77;,a7 and and inserting income described in paragraph 7#a77;,a71 foreign branch income1 and4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #adcjc4 ,acceleration of election to allocate interest1 etc41 on a worldwide basis 7a7 ,in general ,section #hfd7;f77#f7 is amended by striking ,december #ca1 #bjbj and inserting ,december #ca1 #bjag4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #adcjd4 ,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 ,,ii ,inbound transactions #addja4 ,base erosion and anti-abuse tax 7a7 ,imposition of tax ,subchapter ,a of chapter #a is amended by adding at the end the following new part3 ,,vii ,base erosion and anti-abuse tax ,sec4 #ei;,a4 ,tax on base erosion payments of taxpayers with substantial gross receipts4 #ei;,a4 ,tax on base erosion payments of taxpayers with substantial gross receipts 7a7 ,imposition of tax ,there is hereby imposed on each applicable taxpayer for any taxable year a tax equal to the base erosion minimum tax amount for the taxable year4 ,such tax shall be in addition to any other tax imposed by this subtitle4 7b7 ,base erosion minimum tax amount ,for purposes of this section-- 7#a7 ,in general ,except as provided in paragraph 7#b71 the term base erosion minimum tax amount means1 with respect to any applicable taxpayer for any taxable year1 the excess 7if any7 of-- 7,a7 an amount equal to #aj percent of the modified taxable income of such taxpayer for the taxable year1 over 7,b7 an amount equal to the regular tax liability 7as defined in section #bf7;b77 of the taxpayer for the taxable year1 reduced 7but not below zero7 by the excess 7if any7 of-- 7i7 the credits allowed under this chapter against such regular tax liability1 over 7ii7 the credit allowed under section #ch for the taxable year which is properly allocable to the research credit determined under section #da7;a74 7#b7 ,modifications for taxable years beginning after #bjbe ,in the case of any taxable year beginning after ,december #ca1 #bjbe1 paragraph 7#a7 shall be applied-- 7,a7 by substituting #ab4e percent for #aj percent in subparagraph 7,a7 thereof1 and 7,b7 by reducing 7but not below zero7 the regular tax liability 7as defined in section #bf7;b77 for purposes of subparagraph 7,b7 thereof by the aggregate amount of the credits allowed under this chapter against such regular tax liability rather than the excess described in such subparagraph4 7c7 ,modified taxable income ,for purposes of this section-- 7#a7 ,in general ,the term modified taxable income means the taxable income of the taxpayer computed under this chapter for the taxable year1 determined without regard to-- 7,a7 any base erosion tax benefit with respect to any base erosion payment1 or 7,b7 the base erosion percentage of any net operating loss deduction allowed under section #agb for the taxable year4 7#b7 ,base erosion tax benefit 7,a7 ,in general ,the term base erosion tax benefit means-- 7i7 any deduction described in subsection 7d77#a7 which is allowed under this chapter for the taxable year with respect to any base erosion payment1 7ii7 in the case of a base erosion payment described in subsection 7d77#b71 any deduction allowed under this chapter for the taxable year for depreciation 7or amortization in lieu of depreciation7 with respect to the property acquired with such payment1 and 7iii7 in the case of a base erosion payment described in subsection 7d77#c71 any reduction in gross receipts with respect to such payment in computing gross income of the taxpayer for the taxable year for purposes of this chapter4 7,b7 ,tax benefits disregarded if tax withheld on base erosion payment 7i7 ,in general ,except as provided in clause 7ii71 any base erosion tax benefit attributable to any base erosion payment-- 7,i7 on which tax is imposed by section #hga or #hha1 and 7,,ii7 with respect to which tax has been deducted and withheld under section #adda or #addb1 shall not be taken into account in computing modified taxable income under paragraph 7#a77;,a7 or the base erosion percentage under paragraph 7#d74 7ii7 ,exception ,the amount not taken into account in computing modified taxable income by reason of clause 7i7 shall be reduced under rules similar to the rules under section #afc7;j77#e77;,b7 7as in effect before the date of the enactment of the ,tax ,cuts and ,jobs ,act74 7#c7 ,special rules for determining interest for which deduction allowed ,for purposes of applying paragraph 7#a71 in the case of a taxpayer to which subsection 7j7 or 7n7 of section #afc applies for the taxable year1 the reduction in the amount of interest for which a deduction is allowed by reason of such subsection shall be treated as allocable first to interest paid or accrued to persons who are not related parties with respect to the taxpayer and then to such related parties4 7#d7 ,base erosion percentage ,for purposes of paragraph 7#a77;,b7-- 7,a7 ,in general ,the term base erosion percentage means1 for any taxable year1 the percentage determined by dividing-- 7i7 the aggregate amount of base erosion tax benefits of the taxpayer for the taxable year1 by 7ii7 the aggregate amount of the deductions allowable to the taxpayer under this chapter for the taxable year4 7,b7 ,special rules ,the amount under subparagraph 7,a77ii7 shall be determined-- 7i7 by taking into account base erosion tax benefits described in clauses 7i7 and 7ii7 of paragraph 7#b77;,a71 and 7ii7 by not taking into account any deduction allowed under section #agb1 #bde;,a1 or #bej for the taxable year4 7d7 ,base erosion payment ,for purposes of this section-- 7#a7 ,in general ,the term base erosion payment means any amount paid or accrued by the taxpayer to a foreign person which is a related party of the taxpayer and with respect to which a deduction is allowable under this chapter4 7#b7 ,purchase of depreciable property ,such term shall also include any amount paid or accrued by the taxpayer to a foreign person which is a related party of the taxpayer in connection with the acquisition by the taxpayer from such person of property of a character subject to the allowance of depreciation 7or amortization in lieu of depreciation74 7#c7 ,certain payments to expatriated entities 7,a7 ,in general ,such term shall also include any amount paid or accrued by the taxpayer with respect to a person described in subparagraph 7,b7 which results in a reduction of the gross receipts of the taxpayer4 7,b7 ,person described ,a person is described in this subparagraph if such person is a-- 7i7 surrogate foreign corporation which is a related party of the taxpayer1 but only if such person first became a surrogate foreign corporation after ,november #i1 #bjag1 or 7ii7 foreign person which is a member of the same expanded affiliated group as the surrogate foreign corporation4 7,c7 ,definitions ,for purposes of this paragraph-- 7i7 ,surrogate foreign corporation ,the term surrogate foreign corporation has the meaning given such term by section #ghgd7;a77#b7 but does not include a foreign corporation treated as a domestic corporation under section #ghgd7;b74 7ii7 ,expanded affiliated group ,the term expanded affiliated group has the meaning given such term by section #ghgd7;c77#a74 7#d7 ,exception for certain amounts with respect to services ,paragraph 7#a7 shall not apply to any amount paid or accrued by a taxpayer for services if-- 7,a7 such services are services which meet the requirements for eligibility for use of the services cost method under section #dhb 7determined without regard to the requirement that the services not contribute significantly to fundamental risks of business success or failure71 and 7,b7 such amount constitutes the total services cost with no markup4 7e7 ,applicable taxpayer ,for purposes of this section-- 7#a7 ,in general ,the term applicable taxpayer means1 with respect to any taxable year1 a taxpayer-- 7,a7 which is a corporation other than a regulated investment company1 a real estate investment trust1 or an ,s corporation1 7,b7 the average annual gross receipts of which for the #c-taxable-year period ending with the preceding taxable year are at least #ejj1jjj1jjj1 and 7,c7 the base erosion percentage 7as determined under subsection 7c77#d77 of which for the taxable year is #d percent or higher4 7#b7 ,gross receipts 7,a7 ,special rule for foreign persons ,in the case of a foreign person the gross receipts of which are taken into account for purposes of paragraph 7#a77;,b71 only gross receipts which are taken into account in determining income which is effectively connected with the conduct of a trade or business within the ,united ,states shall be taken into account4 ,in the case of a taxpayer which is a foreign person1 the preceding sentence shall not apply to the gross receipts of any ,united ,states person which are aggregated with the taxpayer's gross receipts by reason of paragraph 7#c74 7,b7 ,other rules made applicable ,rules similar to the rules of subparagraphs 7,b71 7,c71 and 7,d7 of section #ddh7;c77#c7 shall apply in determining gross receipts for purposes of this section4 7#c7 ,aggregation rules ,all persons treated as a single employer under subsection 7a7 of section #eb shall be treated as #a person for purposes of this subsection and subsection 7c77#d71 except that in applying section #aefc for purposes of section #eb1 the exception for foreign corporations under section #aefc7;b77#b77;,c7 shall be disregarded4 7f7 ,foreign ,person ,for purposes of this section1 the term foreign person has the meaning given such term by section #fjch;,a7c77#c74 7g7 ,related party ,for purposes of this section-- 7#a7 ,in general ,the term related party means1 with respect to any applicable taxpayer-- 7,a7 any #be-percent owner of the taxpayer1 7,b7 any person who is related 7within the meaning of section #bfg7;b7 or #gjg7;b77#a77 to the taxpayer or any #be-percent owner of the taxpayer1 and 7,c7 any other person who is related 7within the meaning of section #dhb7 to the taxpayer4 7#b7 #be-percent owner ,the term #be-percent owner means1 with respect to any corporation1 any person who owns at least #be percent of-- 7,a7 the total voting power of all classes of stock of a corporation entitled to vote1 or 7,b7 the total value of all classes of stock of such corporation4 7#c7 ,section #cah to apply ,section #cah shall apply for purposes of paragraphs 7#a7 and 7#b71 except that-- 7,a7 #aj percent shall be substituted for #ej percent in section #cah7;a77#b77;,c71 and 7,b7 subparagraphs 7,a71 7,b71 and 7,c7 of section #cah7;a77#c7 shall not be applied so as to consider a ,united ,states person as owning stock which is owned by a person who is not a ,united ,states person4 7h7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section1 including regulations providing for such adjustments to the application of this section as are necessary to prevent the avoidance of the purposes of this section1 including through-- 7#a7 the use of unrelated persons1 conduit transactions1 or other intermediaries1 or 7#b7 transactions or arrangements designed1 in whole or in part-- 7,a7 to characterize payments otherwise subject to this section as payments not subject to this section1 or 7,b7 to substitute payments not subject to this section for payments otherwise subject to this section4 4 7b7 ,reporting requirements and penalties 7#a7 ,in general ,subsection 7b7 of section #fjch;,a is amended to read as follows3 7b7 ,required information 7#a7 ,in general ,for purposes of subsection 7a71 the information described in this subsection is such information as the ,secretary prescribes by regulations relating to-- 7,a7 the name1 principal place of business1 nature of business1 and country or countries in which organized or resident1 of each person which-- 7i7 is a related party to the reporting corporation1 and 7ii7 had any transaction with the reporting corporation during its taxable year1 7,b7 the manner in which the reporting corporation is related to each person referred to in subparagraph 7,a71 and 7,c7 transactions between the reporting corporation and each foreign person which is a related party to the reporting corporation4 7#b7 ,additional information regarding base erosion payments ,for purposes of subsection 7a7 and section #fjch;,c1 if the reporting corporation or the foreign corporation to whom section #fjch;,c applies is an applicable taxpayer1 the information described in this subsection shall include-- 7,a7 such information as the ,secretary determines necessary to determine the base erosion minimum tax amount1 base erosion payments1 and base erosion tax benefits of the taxpayer for purposes of section #ei;,a for the taxable year1 and 7,b7 such other information as the ,secretary determines necessary to carry out such section4 ,for purposes of this paragraph1 any term used in this paragraph which is also used in section #ei;,a shall have the same meaning as when used in such section4 4 7#b7 ,increase in penalty ,paragraphs 7#a7 and 7#b7 of section #fjch;,a7d7 are each amended by striking #aj1jjj and inserting #be1jjj4 7c7 ,disallowance of credits against base erosion tax ,paragraph 7#b7 of section #bf7;b7 is amended by inserting after subparagraph 7,a7 the following new subparagraph3 7,b7 section #ei;,a 7relating to base erosion and anti-abuse tax71 4 7d7 ,conforming amendments 7#a7 ,the table of parts for subchapter ,a of chapter #a is amended by adding after the item relating to part ,,vi the following new item3 ,part ,,vii4 ,base erosion and anti-abuse tax 4 7#b7 ,paragraph 7#a7 of section #hhb7;a71 as amended by this ,act1 is amended by inserting or #ei;,a1 after section #aa14 7#c7 ,subparagraph 7,a7 of section #fdbe7;c77#a71 as amended by sections #abjja and #acjja1 is amended to read as follows3 7,a7 the sum of-- 7i7 the tax imposed by section #aa1 or subchapter ,l of chapter #a1 whichever is applicable1 plus 7ii7 the tax imposed by section #ei;,a1 over 4 7#d7 7,a7 ,subparagraph 7,a7 of section #ffee7;g77#a71 as amended by sections #abjja and #acjja1 is amended by striking plus at the end of clause 7i71 by redesignating clause 7ii7 as clause 7iii71 and by inserting after clause 7i7 the following new clause3 7ii7 the tax imposed by section #ei;,a1 plus 4 7,b7 ,subparagraphs 7,a77i7 and 7,b77i7 of section #ffee7;e77#b71 as amended by section #acjja1 are each amended by inserting and modified taxable income after taxable income4 7,c7 ,subparagraph 7,b7 of section #ffee7;e77#b7 is amended by adding at the end the following new clause3 7iii7 ,modified taxable income ,the term modified taxable income has the meaning given such term by section #ei;,a7c77#a74 4 7e7 ,effective date ,the amendments made by this section shall apply to base erosion payments 7as defined in section #ei;,a7d7 of the ,internal ,revenue ,code of #aihf1 as added by this section7 paid or accrued in taxable years beginning after ,december #ca1 #bjag4 ,,iii ,other provisions #adeja4 ,taxation of passenger cruise gross income of foreign corporations and nonresident alien individuals 7a7 ,in general ,section #hhb is amended by redesignating subsection 7f7 as subsection 7g7 and by inserting after subsection 7e7 the following new subsection3 7f7 ,treatment of passenger cruise gross income 7#a7 ,in general ,for purposes of this title1 the effectively connected passenger cruise gross income of a foreign corporation shall be treated as gross income which is effectively connected with the conduct of a trade or business in the ,united ,states4 7#b7 ,effectively connected passenger cruise gross income ,for purposes of this subsection1 the term effectively connected passenger cruise gross income means1 with respect to the operation of any ship in a covered voyage1 the ,united ,states territorial waters percentage of the gross income 7determined without regard to section #hhc7;a77#a77 derived from such operation1 including any amount received with respect to the provision of any on- or off-board activities1 services1 or sales1 with respect to passengers incidental to such operation 7or with respect to any agreement with any person with respect to the provision of any such activities1 services1 or sales74 7#c7 ,united ,states territorial waters percentage ,for purposes of this subsection-- 7,a7 ,in general ,the term ,united ,states territorial waters percentage means1 with respect to the operation of any ship in any covered voyage1 the ratio 7expressed as a percentage7 of-- 7i7 the number of days during such voyage such ship was operated in the territorial waters of the ,united ,states1 divided by 7ii7 the total number of days of such voyage4 7,b7 ,calendar day rule ,if a ship-- 7i7 is operated in a covered voyage1 or 7ii7 is operated in the territorial waters of the ,united ,states during a covered voyage1 for any portion of a calendar day1 such ship shall be treated as having operated in a covered voyage1 or as having operated in such territorial waters1 respectively1 for the entirety of such day4 7,c7 ,territorial waters ,the territorial waters of the ,united ,states shall be treated as consisting of those waters which are-- 7i7 within the international boundary line between the ,united ,states and any contiguous foreign country1 or 7ii7 within #ab nautical miles from low tide on the coastline of the ,united ,states4 7#d7 ,covered voyage ,for purposes of this subsection-- 7,a7 ,in general ,the term covered voyage has the meaning given such term by section #ddgb7a74 7,b7 ,anti-abuse rule ,except as otherwise provided by the ,secretary1 if passengers embark a ship in the ,united ,states and more than #aj percent of such passengers disembark in the ,united ,states1 the operation of such ship at all times between such events shall be treated as a covered voyage4 ,nothing in the preceding sentence shall preclude any operation of a ship 7including any operation of a ship before or after such events7 which would otherwise be treated as part of a covered voyage from being so treated4 7#e7 ,treatment of otherwise effectively connected income ,gross income which would1 without regard to this subsection1 be gross income which is effectively connected with the conduct of a trade or business in the ,united ,states-- 7,a7 shall be so treated1 and 7,b7 shall not be taken into account as gross income under paragraph 7#b74 4 7b7 ,application to nonresident alien individuals ,section #hga is amended by redesignating subsection 7n7 as subsection 7o7 and by inserting after subsection 7m7 the following new subsection3 7n7 ,treatment of passenger cruise gross income 7#a7 ,in general ,for purposes of this title1 the effectively connected passenger cruise gross income of a nonresident alien individual shall be treated as gross income which is effectively connected with the conduct of a trade or business in the ,united ,states4 7#b7 ,definitions and special rules ,for purposes of this subsection-- 7,a7 ,definitions ,terms used in this subsection which are also used in section #hhb7;f7 shall have the same meaning as when used in such section1 except that section #hhb7;f77#b7 shall be applied by substituting section #hgb7;b77#a7 for section #hhc7;a77#a74 7,b7 ,treatment of otherwise effectively connected income ,rules similar to the rules of section #hhb7;f77#e7 shall apply for purposes of this subsection4 4 7c7 ,coordination with reciprocal exemptions for shipping income 7#a7 ,in general ,section #hhc7;a77#a7 is amended by striking ,gross income and inserting ,except as provided in section #hhb7;f71 gross income4 7#b7 ,nonresident alien individuals ,section #hgb7;b77#a7 is amended by striking ,gross income and inserting ,except as provided in section #hga7n71 gross income4 7d7 ,coordination with tax on gross transportation income ,section #hhg7;b77#d7 is amended by adding at the end the following new flush text3 ,the preceding sentence shall not apply to any ,united ,states source gross transportation income which is effectively connected passenger cruise gross income 7within the meaning of section #hga7n7 or #hhb7;f774 4 7e7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #adejb4 ,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 #adejc4 ,repeal of fair market value method of interest expense apportionment 7a7 ,in general ,paragraph 7#b7 of section #hfd7;e7 is amended to read as follows3 7#b7 ,gross income and fair market value methods may not be used for interest ,all allocations and apportionments of interest expense shall be determined using the adjusted bases of assets rather than on the basis of the fair market value of the assets or gross income4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 #adejd4 ,modification to source rules involving possessions 7a7 ,in general ,subsection 7b77#b7 of ,section #icg of the ,internal ,revenue ,code of #aihf is amended by inserting 1 but only to the extent such income is attributable to an office or fixed place of business within the ,united ,states 7determined under the rules of ,section #hfd7;c77#e77 before the period at the end4 7b7 ,source rules for personal property sales ,subsection 7j77#c7 of section #hfe of the ,internal ,revenue ,code of #aihf is amended by inserting #icb1 after #ica14 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjah4 #adeje4 ,repeal of exclusion applicable to certain passenger aircraft operated by a foreign corporation 7a7 ,in general ,section #hhc is amended-- 7#a7 by striking ,gross income in subsection 7a77#b7 and inserting ,except as provided in subsection 7d71 gross income1 and 7#b7 by adding at the end the following new subsection3 7d7 ,exception for aircraft operated by foreign corporations 7#a7 ,in general ,subsection 7a77#b7 shall not apply to any corporation operating a passenger airline if-- 7,a7 the corporation is organized in a foreign country the residents of which are not eligible for a reduced rate of tax or an exemption from tax under section #hha or #hhb1 and 7,b7 such foreign country has fewer than #b arrivals and departures1 per week1 from passenger airline carriers which-- 7i7 are organized under the laws of the ,united ,states or any ,state1 and 7ii7 have annual gross operational revenues of more than #a1jjj1jjj1jjj4 ,for purposes of subparagraph 7,b71 an aircraft that lands in one country and subsequently departs from that country shall be treated as having engaged in #a arrival and departure4 7#b7 ,inflation adjustment ,in the case of any calendar year beginning after #bjah1 the dollar amount in subparagraph 7,a77ii7 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;f77#c7 for the calendar year1 determined by substituting calendar year #bjag for calendar year #bjaf in subparagraph 7,a77ii7 thereof4 ,any increase determined under the preceding sentence shall be rounded to the nearest multiple of #a1jjj1jjj4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,e ,revenue dependent proposals #aejja4 ,repeal of increased limitation on net operating losses ,section #agb7;a77#b71 as amended by section #accjb1 is amended by striking 7#hj percent1 in the case of taxable years beginning after ,december #ca1 #bjbb74 #aejjb4 ,repeal of limitation on deduction for meals provided at the convenience of the employer ,section #bgd1 as amended by section #accjd1 is amended by striking subsection 7o7 and redesignating subsection 7p7 as subsection 7o74 #aejjc4 ,repeal of reduced deduction for global intangible low-taxed income and foreign-derived intangible income ,section #bej7;a71 as added by section #adbjb1 is amended by striking paragraph 7#c74 #aejjd4 ,repeal of modifications to the base erosion and anti-abuse tax ,section #ei;,a7b71 as added by section #addja1 is amended to read as follows3 7b7 ,base erosion minimum tax amount ,for purposes of this section1 the term base erosion minimum tax amount means1 with respect to any applicable taxpayer for any taxable year1 the excess 7if any7 of-- 7#a7 an amount equal to #aj percent of the modified taxable income of such taxpayer for the taxable year1 over 7#b7 an amount equal to the regular tax liability 7as defined in section #bf7;b77 of the taxpayer for the taxable year1 reduced 7but not below zero7 by the excess 7if any7 of-- 7,a7 the credits allowed under this chapter against such regular tax liability1 over 7,b7 the credit allowed under section #ch for the taxable year which is properly allocable to the research credit determined under section #da7;a74 4 #aejje4 ,repeal of amortization of research and experimental expenditures 7a7 ,in general ,section #agd1 as amended by section #acbjf1 is amended to read as follows3 #agd4 ,research and experimental expenditures 7a7 ,treatment as ,expenses 7#a7 ,in general ,a taxpayer may treat research or experimental expenditures which are paid or incurred by him during the taxable year in connection with his trade or business as expenses which are not chargeable to capital account4 ,the expenditures so treated shall be allowed as a deduction4 7#b7 ,when method may be adopted 7,a7 ,without consent ,a taxpayer may1 without the consent of the ,secretary1 adopt the method provided in this subsection for his first taxable year for which expenditures described in paragraph 7#a7 are paid or incurred4 7,b7 ,with consent ,a taxpayer may1 with the consent of the ,secretary1 adopt at any time the method provided in this subsection4 7#c7 ,scope ,the method adopted under this subsection shall apply to all expenditures described in paragraph 7#a74 ,the method adopted shall be adhered to in computing taxable income for the taxable year and for all subsequent taxable years unless1 with the approval of the ,secretary1 a change to a different method is authorized with respect to part or all of such expenditures4 7b7 ,amortization of ,certain ,research and ,experimental ,expenditures 7#a7 ,in general ,at the election of the taxpayer1 made in accordance with regulations prescribed by the ,secretary1 research or experimental expenditures which are-- 7,a7 paid or incurred by the taxpayer in connection with his trade or business1 7,b7 not treated as expenses under subsection 7a71 and 7,c7 chargeable to capital account but not chargeable to property 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 depletion71 may be treated as deferred expenses4 ,in computing taxable income1 such deferred expenses shall be allowed as a deduction ratably over such period of not less than #fj months as may be selected by the taxpayer 7beginning with the month in which the taxpayer first realizes benefits from such expenditures74 ,such deferred expenses are expenditures properly chargeable to capital account for purposes of section #ajaf7;a77#a7 7relating to adjustments to basis of property74 7#b7 ,time for and scope of election ,the election provided by paragraph 7#a7 may be made for any taxable year1 but only if made not later than the time prescribed by law for filing the return for such taxable year 7including extensions thereof74 ,the method so elected1 and the period selected by the taxpayer1 shall be adhered to in computing taxable income for the taxable year for which the election is made and for all subsequent taxable years unless1 with the approval of the ,secretary1 a change to a different method 7or to a different period7 is authorized with respect to part or all of such expenditures4 ,the election shall not apply to any expenditure paid or incurred during any taxable year before the taxable year for which the taxpayer makes the election4 7c7 ,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 7d7 ,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 7e7 ,only ,reasonable ,research ,expenditures ,eligible ,this section shall apply to a research or experimental expenditure only to the extent that the amount thereof is reasonable under the circumstances4 7f7 ,cross ,references 7#a7 ,for adjustments to basis of property for amounts allowed as deductions as deferred expenses under subsection 7b71 see section #ajaf7;a77#ad74 7#b7 ,for election of #aj-year amortization of expenditures allowable as a deduction under subsection 7a71 see section #ei7;e74 4 7b7 ,change in method of accounting ,the amendments made by subsection 7a7 shall be treated as a change in method of accounting for purposes of section #dha of the ,internal ,revenue ,code of #aihf and-- 7#a7 such change shall be treated as initiated by the taxpayer1 7#b7 such change shall be treated as made with the consent of the ,secretary1 and 7#c7 such change shall be applied only on a cut-off basis for any research or experimental expenditures paid or incurred in taxable years beginning after ,december #ca1 #bjbe1 and no adjustments under section #dha7;a7 shall be made4 7c7 ,conforming amendments 7#a7 ,section #da7;d77#a77;,a71 as amended by section #acbjf1 is amended by striking specified research or experimental expenditures under section #agd and inserting expenses under section #agd4 7#b7 ,subsection 7c7 of section #bhj;,c1 as amended by section #acbjf1 is amended-- 7,a7 by redesignating paragraphs 7#b7 and 7#c7 as paragraphs 7#c7 and 7#d71 respectively1 and 7,b7 by striking paragraph 7#a7 and inserting the following3 7#a7 ,in general ,no deduction shall be allowed for that portion of the qualified research expenses 7as defined in section #da7;b77 or basic research expenses 7as defined in section #da7;e77#b77 otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section #da7;a74 7#b7 ,similar rule where taxpayer capitalizes rather than deducts expenses ,if-- 7,a7 the amount of the credit determined for the taxable year under section #da7;a77#a71 exceeds 7,b7 the amount allowable as a deduction for such taxable year for qualified research expenses or basic research expenses 7determined without regard to paragraph 7#a771 the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess4 1 and 7,c7 in paragraph 7#c77;,a77i71 as redesignated by subparagraph 7,a71 by striking paragraph 7#a7 and inserting paragraphs 7#a7 and 7#b74 7#c7 ,the table of sections for part ,,vi of subchapter ,b of chapter #a1 as amended by section #acbjf1 is amended by striking the item related to section #agd and inserting the following3 ,sec4 #agd4 ,research and experimental expenditures4 4 #aejjf4 ,reporting 7a7 ,in general ,subpart ,b of part ,,iii of subchapter ,a of chapter #fa1 as amended by this ,act1 is amended by adding at the end the following new section3 #fjej,z4 ,transaction affecting revenue dependent proposals 7a7 ,research and experimental expenditures ,any taxpayer who makes research and experimental expenditures 7within the meaning of section #agd7 during a taxable year shall make a return according to the forms and regulations prescribed by the ,secretary1 setting forth the aggregate amount of such expenditures4 7b7 ,foreign related party payments ,any taxpayer who makes a payment to a foreign person which is a related party 7as such terms are defined in section #ei;,a7 of the taxpayer during the taxable year shall make a return according to the forms and regulations prescribed by the ,secretary1 setting forth-- 7#a7 the amount of such payments by type and separately stated1 and 7#b7 any amount paid which results in a reduction of gross receipts to the taxpayer4 7c7 ,foreign-derived intangible income ,any taxpayer who has foreign-derived intangible income 7as defined in section #bej7;b77 for a taxable year shall make a return according to the forms and regulations prescribed by the ,secretary1 setting forth-- 7#a7 the aggregate amount of such income1 7#b7 the amount of foreign-derived deduction eligible income 7as defined in section #bej7;b77#d771 and 7#c7 a certification that any income described in paragraph 7#b7 does not relate to the sale of products for any use1 consumption1 or disposition within the ,united ,states4 4 7b7 ,penalty ,section #ffeb1 as amended by section #acfjc1 is amended by adding at the end the following new subsection3 7q7 ,failure to file with respect to transactions affecting revenue dependent proposals ,in the case of any failure to make a return required under section #fjej,z containing the information required by such section on the date prescribed therefor 7determined with regard to any extension of time for filing71 unless it is shown that such failure is due to reasonable cause1 there shall be paid 7on notice and demand by the ,secretary and in the same manner as tax7 by the person failing to file such return1 an amount equal to #a1jjj for each day during which such failure continues1 but the total amount imposed under this subsection with respect to any return shall not exceed #bej1jjj4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjbd4 #aejjg4 ,effective date 7a7 ,in general ,the amendments made by this subtitle shall apply to taxable years beginning after ,december #ca1 #bjbe4 7b7 ,revenue requirement ,notwithstanding subsection 7a71 the amendments made by this subtitle shall not take effect unless-- 7#a7 the excess of-- 7,a7 the cumulative aggregate on-budget ,federal revenue from all sources for the period beginning on ,october #a1 #bjag1 and ending on ,september #cj1 #bjbf1 7as determined by the ,secretary of the ,treasury based on amounts reported in the ,financial ,report of the ,united ,states71 over 7,b7 #bg1dhg1jjj1jjj1jjj1 is greater than or equal to 7#b7 #ijj1jjj1jjj1jjj4 ,,ii #bjjja4 ,oil and gas program 7a7 ,definitions ,in this section3 7#a7 ,coastal ,plain ,the term ,coastal ,plain means the area identified as the #ajjb ,area on the plates prepared by the ,united ,states ,geological ,survey entitled ,,anwr ,map - ,plate #a and ,,anwr ,map - ,plate #b1 dated ,october #bd1 #bjag1 and on file with the ,united ,states ,geological ,survey and the ,office of the ,solicitor of the ,department of the ,interior4 7#b7 ,secretary ,the term ,secretary means the ,secretary of the ,interior1 acting through the ,bureau of ,land ,management4 7b7 ,oil and gas program 7#a7 ,in general ,section #ajjc of the ,alaska ,national ,interest ,lands ,conservation ,act 7#af ,u4,s4,c4 #cadc7 is repealed4 7#b7 ,establishment 7,a7 ,in general ,the ,secretary shall establish and administer a competitive oil and gas program for the leasing1 development1 production1 and transportation of oil and gas in and from the ,coastal ,plain4 7,b7 ,purposes ,section #cjc7b77;,b7 of the ,alaska ,national ,interest ,lands ,conservation ,act 7,public ,law #if-dhg2 #id ,stat4 #bcij7 is amended-- 7i7 in clause 7iii71 by striking and at the end2 7ii7 in clause 7iv71 by striking the period at the end and inserting 2 and2 and 7iii7 by adding at the end the following3 7v7 to provide for an oil and gas program on the ,coastal ,plain4 4 7#c7 ,management ,except as otherwise provided in this section1 the ,secretary shall manage the oil and gas program on the ,coastal ,plain in accordance with the ,naval ,petroleum ,reserves ,production ,act of #aigf 7#db ,u4,s4,c4 #feja et seq47 7including regulations74 7#d7 ,royalties ,notwithstanding the ,mineral ,leasing ,act 7#cj ,u4,s4,c4 #aha et seq471 the royalty rate for leases issued pursuant to this section shall be #af4fg percent4 7#e7 ,receipts ,notwithstanding the ,mineral ,leasing ,act 7#cj ,u4,s4,c4 #aha et seq471 of the amount of adjusted bonus1 rental1 and royalty receipts derived from the oil and gas program and operations on ,federal land authorized under this section-- 7,a7 #ej percent shall be paid to the ,state of ,alaska2 and 7,b7 the balance shall be deposited into the ,treasury as miscellaneous receipts4 7c7 #b lease sales within #aj years 7#a7 ,requirement 7,a7 ,in general ,subject to subparagraph 7,b71 the ,secretary shall conduct not fewer than #b lease sales area-wide under the oil and gas program under this section by not later than #aj years after the date of enactment of this ,act4 7,b7 ,sale acreages2 schedule 7i7 ,acreages ,the ,secretary shall offer for lease under the oil and gas program under this section-- 7,i7 not fewer than #djj1jjj acres area-wide in each lease sale2 and 7,,ii7 those areas that have the highest potential for the discovery of hydrocarbons4 7ii7 ,schedule ,the ,secretary shall offer-- 7,i7 the initial lease sale under the oil and gas program under this section not later than #d years after the date of enactment of this ,act2 and 7,,ii7 a second lease sale under the oil and gas program under this section not later than #g years after the date of enactment of this ,act4 7#b7 ,rights-of-way ,the ,secretary shall issue any rights-of-way or easements across the ,coastal ,plain for the exploration1 development1 production1 or transportation necessary to carry out this section4 7#c7 ,surface development ,in administering this section1 the ,secretary shall authorize up to #b1jjj surface acres of ,federal land on the ,coastal ,plain to be covered by production and support facilities 7including airstrips and any area covered by gravel berms or piers for support of pipelines7 during the term of the leases under the oil and gas program under this section4 #bjjjb4 ,limitations on amount of distributed qualified outer ,continental ,shelf revenues ,section #aje7;f77#a7 of the ,gulf of ,mexico ,energy ,security ,act of #bjjf 7#dc ,u4,s4,c4 #acca note2 ,public ,law #aji-dcb7 is amended by striking exceed #ejj1jjj1jjj for each of fiscal years #bjaf through #bjee4 and inserting the following3 8exceed-- 7,a7 #ejj1jjj1jjj for each of fiscal years #bjaf through #bjai2 7,b7 #fej1jjj1jjj for each of fiscal years #bjbj and #bjba2 and 7,c7 #ejj1jjj1jjj for each of fiscal years #bjbb through #bjee4 4 #bjjjc4 ,strategic ,petroleum ,reserve drawdown and sale 7a7 ,drawdown and sale 7#a7 ,in general ,notwithstanding section #afa of the ,energy ,policy and ,conservation ,act 7#db ,u4,s4,c4 #fbda71 except as provided in subsections 7b7 and 7c71 the ,secretary of ,energy shall draw down and sell from the ,strategic ,petroleum ,reserve #e1jjj1jjj barrels of crude oil during the period of fiscal years #bjbf through #bjbg4 7#b7 ,deposit of amounts received from sale ,amounts received from a sale under paragraph 7#a7 shall be deposited in the general fund of the ,treasury during the fiscal year in which the sale occurs4 7b7 ,emergency protection ,the ,secretary of ,energy shall not draw down and sell crude oil under subsection 7a7 in a quantity that would limit the authority to sell petroleum products under subsection 7h7 of section #afa of the ,energy ,policy and ,conservation ,act 7#db ,u4,s4,c4 #fbda7 in the full quantity authorized by that subsection4 7c7 ,limitation ,the ,secretary of ,energy shall not drawdown or conduct sales of crude oil under subsection 7a7 after the date on which a total of #cbe1jjj1jjj has been deposited in the general fund of the ,treasury from sales authorized under that subsection4 ,november #bh1 #bjag,read twice and placed on the calendar