,i  #aaf? ,,congress  #b;d ,session  ,h4
 ,r4 #efdc  ,,9 ,,! ,,h\se ,,(          
,,repres5tatives  ,janu>y #af1 #bjbj,mr4
 ,k9d 7= himself & ,mr4 ,w5/rup7        
introduc$ ! foll[+ bill2 :i* 0 ref]r$ to
 ! ,committee on ,ways & ,means  ,a     
,,bill  ,to am5d ! ,int]nal ,rev5ue     
,code ( #aihf to provide = ,s           
corporation re=m1 & = o!r purposes4  #a4
 ,%ort title2 ref]5ce  7a7 ,%ort ,title 
,?is ,act may be cit$ z ! ,s            
,corporation ,mod]nization ,act ( #bjbj4
  7b7 ,am5dm5t ( #aihf ,code ,except z  
o!rwise expressly provid$1 :5ev] 9 ?is  
,act an am5dm5t or repeal is express$ 9 
t]ms ( an am5dm5t to1 or repeal (1 a    
section or o!r provision1 ! ref]5ce %all
 be consid]$ to be made to a section or 
o!r provision ( ! ,int]nal ,rev5ue ,code
 ( #aihf4  #b4 ,modifications to ,s     
corporation passive inve/m5t income     
rules  7a7 ,increas$ p]c5tage limit     
,section #acge7;a77#b7 is am5d$ by /rik+
 #be p]c5t & ins]t+ #fj p]c5t4  7b7     
,repeal ( excessive passive income z a  

t]m9ation ev5t ,section #acfb7;d7 is    
am5d$ by /rik+ p>agraph 7#c74  7c7      
,con=m+ am5dm5ts  7#a7 ,section         
#acge7;b7 is am5d$ by /rik+ p>agraphs   
7#c7 & 7#d7 & ins]t+ ! foll[+ new       
p>agraph3  7#c7 ,passive inve/m5t income
 def9$  7,a7 ,9 g5]al ,except z o!rwise 
provid$ 9 ?is p>agraph1 ! t]m passive   
inve/m5t income means gross receipts    
d]iv$ f royalties1 r5ts1 divid5ds1      
int]e/1 & annuities4  7,b7 ,exception = 
int]e/ on notes f sales ( inv5tory ,!   
t]m passive inve/m5t income %all n      
include int]e/ on any obligation acquir$
 9 ! ord9>y c\rse ( ! corporation's     
trade or bus9ess f its sale ( prop]ty   
describ$ 9 section #abba7;a77#a74  7,c7 
,treatm5t ( c]ta9 l5d+ or f9ance        
companies ,if ! ,s corporation meets !  
requirem5ts ( section #edb7;c77#f7 = !  
taxable ye>1 ! t]m passive inve/m5t     
income %all n include gross receipts = !
 taxable ye> :i* are d]iv$ directly f ! 
active & regul> conduct ( a l5d+ or     
f9ance bus9ess 7z def9$ 9 section       

#edb7;d77#a774  7,d7 ,treatm5t ( c]ta9  
divid5ds ,if an ,s corporation holds    
/ock 9 a ,c corporation meet+ !         
requirem5ts ( section #aejd7;a77#b71 !  
t]m passive inve/m5t income %all n      
include divid5ds f su* ,c corporation to
 ! ext5t su* divid5ds are attributable  
to ! e>n+s & pr(its ( su* ,c corporation
 d]iv$ f ! active conduct ( a trade or  
bus9ess4  7,e7 ,exception = banks1 etc  
,9 ! case ( a bank 7z def9$ 9 section   
#eha7 or a depository in/itution hold+  
company 7z def9$ 9 section #c7w77#a7 ( !
 ,f$]al ,deposit ,insurance ,act 7#ab   
,u4,s4,c4 #ahac7w77#a7771 ! t]m passive 
inve/m5t income %all n include--  7i7   
int]e/ income e>n$ by su* bank or       
company1 or  7ii7 divid5ds on assets    
requir$ to be held by su* bank or       
company1 includ+ /ock 9 ! ,f$]al ,res]ve
 ,bank1 ! ,f$]al ,home ,loan ,bank1 or !
 ,f$]al ,agricultural ,mortgage ,bank or
 p>ticipation c]tificates issu$ by a    
,f$]al ,int]m$iate ,cr$it ,bank4  7,f7  
,gross receipts f ! sales ( c]ta9 assets

 ,= purposes ( ?is p>agraph-- 7i7       
,capital assets o!r ?an /ock &          
securities ,9 ! case ( dispositions (   
capital assets 7o!r ?an /ock &          
securities71 gross receipts f su*       
dispositions %all be tak5 into acc\nt   
only to ! ext5t ( capital ga9 net income
 !refrom4  7ii7 ,/ock & securities ,9 ! 
case ( sales or ex*anges ( /ock or      
securities1 gross receipts %all be tak5 
into acc\nt only to ! ext5t ( ! ga9     
!refrom4  7,g7 ,coord9ation ) section   
#acgd ,! am\nt ( passive inve/m5t income
 %all be det]m9$ by n tak+ into acc\nt  
any recogniz$ built-9 ga9 or loss ( ! ,s
 corporation = any taxable ye> 9 !      
recognition p]iod4 ,t]ms us$ 9 ! prec$+ 
s5t5ce %all h ! same respective mean+s z
 :5 us$ 9 section #acgd4  4  7#b7  7,a7 
,section #bf7;b77#b77;,j7 is am5d$ by   
/rik+ #be p]c5t & ins]t+ #fj p]c5t4     
7,b7 ,section #acge7;b77#a77;,a77i7 is  
am5d$ by /rik+ #be p]c5t & ins]t+ #fj   
p]c5t4  7,c7 ,! head+ = section #acge is
 am5d$ by /rik+ #be p]c5t & ins]t+ #fj  

p]c5t4  7,d7 ,! item relat+ to section  
#acge 9 ! table ( sections = "p ,,iii ( 
sub*apt] ,s ( *apt] #a is am5d$ by /rik+
 #be p]c5t & ins]t+ #fj p]c5t4  7#c7    
,section #ajdb7;c77#d77;,a77i7 is am5d$ 
by /rik+ section #acfb7;d77#c77;,c7 &   
ins]t+ section #acge7;b77#c74  7#d7     
,section #acfb7;f77#a77;,b7 is am5d$ by 
/rik+ p>agraph 7#b7 or 7#c7 ( subsection
 7d7 & ins]t+ subsection 7d77#b74  7d7  
,effective ,date ,! am5dm5ts made by ?is
 section %all apply to taxable ye>s     
beg9n+ aft] ,decemb] #ca1 #bjbj4  #c4   
,expansion ( ,s corporation eligible    
%>ehold]s to include ,i,r,as  7a7 ,9    
,g5]al ,section #acfa7;c77#b77;,a77vi7  
is am5d$ to read z foll[s3  7vi7 ,a tru/
 :i* con/itutes an individual retirem5t 
acc\nt "u section #djh7;a71 includ+ "o  
designat$ z a ,ro? ,,ira "u section     
#djh;,a4  4  7b7 ,sale ( ,/ock 9 ,,ira  
,relat+ to ,s ,corporation ,election    
,exempt ,f ,prohibit$ ,transaction      
,rules ,section #dige7;d77#af7 is       
am5d$-- 7#a7 by /rik+ subp>agraphs 7,a7 

& 7,b7 & by r$esignat+ subp>agraphs     
7,c71 7,d71 7,e71 & 7,f7 z subp>agraphs 
7,a71 7,b71 7,c71 & 7,d71 respectively1 
&  7#b7 by /rik+ su* bank or company 9  
subp>agraph 7,a7 7z s r$esignat$7 &     
ins]t+ ! issu] ( su* /ock4  7c7         
,effective ,date ,! am5dm5ts made by ?is
 section %all take effect on ,janu>y #a1
 #bjba4  #d4 ,treatm5t ( ,s corporation 
built-9 ga9 am\nt ^u dea? ( %>ehold]    
7a7 ,9 g5]al ,"p ,,ii ( sub*apt] ,s (   
*apt] #a is am5d$ by add+ at ! end !    
foll[+3  #acfi4 ,amortization ( built-9 
ga9 am\nt ^u dea? ( %>ehold]  7a7 ,9    
g5]al ,a p]son hold+ /ock 9 an elect+ ,s
 corporation ! basis ( :i* is det]m9$ "u
 section #ajad7;a7 7h]eaft] 9 ?is       
section ref]r$ to z ! %>ehold]7 %all be 
all[$ a d$uction ) respect to ! ,s      
corporation built-9 ga9 am\nt4 ,! am\nt 
( su* d$uction = any taxable ye> %all be
 det]m9$ by amortiz+ ! ,s corporation   
built-9 ga9 am\nt ov] ! #ae-ye> p]iod   
beg9n+ ) ! mon? :i* includes !          
applicable valuation date4  7b7 ,s      

corporation built-,9 ga9 am\nt ,=       
purposes ( ?is section1 ! t]m ,s        
corporation built-9 ga9 am\nt means !   
less] (-- 7#a7 ! excess 7if any7 (--    
7,a7 ! basis ( ! /ock ref]r$ to 9       
subsection 7a7 z det]m9$ "u section     
#ajad7;a71 ov]  7,b7 ! adju/$ basis (   
su* /ock imm$iately be=e ! dea? ( !     
dec$5t1 or  7#b7 ! pro rata %>e 7det]m9$
 z ( ! applicable valuation date7 (--   
7,a7 ! aggregate fair m>ket value ( all 
prop]ty held by ! ,s corporation :i* is 
( a "* subject to depreciation or       
amortization1 ov]  7,b7 ! aggregate     
adju/$ basis ( all su* prop]ty held by !
 ,s corporation z ( su* date4  7c7      
,elect+ ,s corporation ,= purposes ( ?is
 section1 ! t]m elect+ ,s corporation   
means1 ) respect to any %>ehold]1 any ,s
 corporation :i* elects ! application ( 
?is section ) respect to su* %>ehold] at
 su* "t & 9 su* =m & mann] z ! ,secret>y
 may prescribe4  7d7 ,applicable        
valuation date ,= purposes ( ?is        
section1 ! t]m applicable valuation date

 means-- 7#a7 9 ! case ( a dec$5t )     
respect to :i* ! executor ( ! dec$5t's  
e/ate elects ! application ( section    
#bjcb1 ! date #f mon?s aft] ! dec$5t's  
dea?1 &  7#b7 9 ! case ( any o!r dec$5t1
 ! date ( ! dec$5t's dea?4  7e7         
,accel]at$ d$uction 9 case ( disposition
 ( ,s corporation prop]ty  7#a7 ,9 g5]al
 ,if ! elect+ ,s corporation disposes ( 
any prop]ty :i* 0 tak5 into acc\nt "u   
subsection 7b77#b71 !n ! d$uction all[$ 
"u subsection 7a7 ) respect to any /ock1
 = ! taxable ye> ( ! %>ehold] 9 :i* or )
 :i* ! taxable ye> ( ! ,s corporation   
:i* includes ! date ( su* disposition   
ends1 %all 7except z o!rwise provid$ 9  
?is section7 n be less ?an ! less] (--  
7,a7 ! pro rata %>e ( ! ga9 recogniz$ on
 su* disposition1 or  7,b7 ! am\nt      
det]m9$ "u subsection 7b77#b7 by only   
tak+ into acc\nt su* prop]ty4  7#b7     
,ov]all all[ance n increas$ ,no d$uction
 %all be all[$ "u subsection 7a7 )      
respect to any /ock = any taxable ye> to
 ! ext5t t su* d$uction 7:5 add$ to !   

d$uctions s all[$ = all prior taxable   
ye>s7 exce$s ! ,s corporation built-9   
ga9 am\nt ) respect to su* /ock4  7f7   
,re*>act]ization ( ga9s z ord9>y income 
to ext5t ( d$uction ,if-- 7#a7 /ock ( an
 ,s corporation ) respect to :i* a      
d$uction 0 all[$ "u ?is section1 or     
7#b7 prop]ty :i* 0 tak5 into acc\nt "u  
subsection 7b77#b7 ) respect to su*     
/ock1  is dispos$ ( at a ga9 7det]m9$   
)\t reg>d to :e!r or n su* ga9 is       
recogniz$ & r$uc$ by any am\nt ( ga9 :i*
 is treat$ z ord9>y income "u any o!r   
provision ( ?is subtitle71 ! am\nt ( su*
 ga9 7or ! %>ehold]'s pro rata %>e ( su*
 ga9 9 ! case ( prop]ty describ$ 9      
p>agraph 7#b77 %all be treat$ z ga9 :i* 
is ord9>y income 7& %all be recogniz$   
not)/&+ any o!r provision ( ?is         
subtitle7 to ! ext5t ( ! excess ( !     
aggregate d$uctions all[able "u ?is     
section ) respect to su* /ock = !       
taxable ye> ( su* disposition & all     
prior taxable ye>s ov] ! am\nts tak5    
into acc\nt "u ?is subsection = all     

prior taxable ye>s4  7g7 ,t]m9ation (   
amortization ,no d$uction %all be all[$ 
"u subsection 7a7 ) respect to any /ock 
9 an elect+ ,s corporation ) respect to 
any p]iod beg9n+ aft] ! e>li] (--  7#a7 
! date on :i* ! corporation's election  
"u section #acfb t]m9ates1 or  7#b7 !   
date on :i* ! %>ehold] transf]s su* /ock
 to any o!r p]son4  7h7 ,treatm5t (     
c]ta9 transf]s  7#a7 ,di/ributions f    
e/ates or tru/s ,not)/&+ any o!r        
provision ( ?is section1 9 ! case ( a   
di/ribution ( /ock f an e/ate or tru/ to
 a b5efici>y1 ! b5efici>y 7& n ! e/ate  
or tru/7 %all be treat$ z ! %>ehold] to 
:i* ?is section applies ) respect to    
p]iods aft] su* di/ribution4  7#b7      
,c]ta9 transf]s involv+ sp\ses ,not)/&+ 
any o!r provision ( ?is section1 9 !    
case ( a transf] describ$ 9 section     
#ajda1 ! transf]ee 7& n ! transf]or7    
%all be treat$ z ! %>ehold] to :i* ?is  
section applies ) respect to p]iods aft]
 su* transf]4  7i7 ,treatm5t ( income 9 
respect ( ! dec$5t  7#a7 ,adju/m5t to   

built-9 ga9 ( prop]ty held by ,s        
corporation ,= purposes ( subsection    
7b77#b71 ! fair m>ket value ( any       
prop]ty tak5 into acc\nt "u subp>agraph 
7,a7 !re( %all be decreas$ by any am\nt 
( income 9 respect ( ! dec$5t ) respect 
to su* prop]ty to :i* section #fia      
applies4 ,= purposes ( subsection       
7e77#a77;,a71 ! ga9 recogniz$ on !      
disposition ( su* prop]ty %all be r$uc$ 
by su* am\nt4  7#b7 ,adju/m5t to basis (
 ,s corporation /ock ,= adju/m5t to     
basis ( ,s corporation /ock1 see section
 #acfg7;b77#d77;,b74  7j7 ,report+      
,except z o!rwise provid$ by !          
,secret>y1 = purposes ( section #fjcg1 !
 am\nts det]m9$ "u subsections 7b77#b71 
7e77#a71 & 7f77#b7 %all be treat$ z     
items ( ! corporation & ! pro rata %>e  
det]m9$ "u su* subsection %all be       
furni%$ to ! %>ehold] "u section        
#fjcg7;b74  4  7b7 ,adju/m5t to basis ( 
/ock  7#a7 ,9 g5]al ,section            
#acfg7;a77#b7 is am5d$ by /rik+ & at !  
end ( subp>agraph 7,d71 by /rik+ ! p]iod

 at ! end ( subp>agraph 7,e7 & ins]t+ 1 
&1 & by ins]t+ aft] subp>agraph 7,e7 !  
foll[+ new subp>agraph3  7,f7 ! am\nt ( 
! %>ehold]'s d$uction all[able "u       
section #acfi4  4  7#b7 ,adju/m5t n tak5
 into acc\nt 9 det]m9+ treatm5t (       
di/ributions ,section #acfh is am5d$--  
7,a7 9 subsection 7d77#a71 by ins]t+    
7o!r ?an subsection 7a77#b77;,f7 !re(7  
aft] section #acfg1 &  7,b7 9 subsection
 7e77#a77;,a7--  7i7 by /rik+ ?is title 
& ! phrase & ins]t+ ?is title1 ! phrase1
 &  7ii7 by ins]t+ 1 & no adju/m5t %all 
be made "u section #acfg7;a77#b77;,f7   
aft] section #acfg7;a77#b74  7c7        
,cl]ical am5dm5t ,! table ( sections =  
"p ,,ii ( sub*apt] ,s ( *apt] #a is     
am5d$ by add+ at ! end ! foll[+ new     
item3  ,sec4 #acfi4 ,amortization (     
built-9 ga9 am\nt ^u dea? ( %>ehold]4  4
  7d7 ,effective date ,! am5dm5ts made  
by ?is section %all apply ) respect to  
dec$5ts dy+ aft] ! date ( ! enactm5t (  
?is ,act1 9 taxable ye>s end+ aft] su*  
date4