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PUBL097
131 STAT. 2054
PUBLIC LAW 115–97—DEC. 22, 2017
Public Law 115–97
115th Congress
An Act
Dec. 22, 2017
[H.R. 1]
To provide for reconciliation pursuant to titles II and V of the concurrent resolution
on the budget for fiscal year 2018.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
TITLE I
SECTION 11000. SHORT TITLE, ETC.
(a) AMENDMENT OF 1986 CODE.—Except as otherwise expressly
provided, whenever in this title an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a section
or other provision, the reference shall be considered to be made
to a section or other provision of the Internal Revenue Code of
1986.
Subtitle A—Individual Tax Reform
PART I—TAX RATE REFORM
SEC. 11001. MODIFICATION OF RATES.
26 USC 1.
(a) IN GENERAL.—Section 1 is amended by adding at the end
the following new subsection:
‘‘(j) MODIFICATIONS FOR TAXABLE YEARS 2018 THROUGH 2025.—
‘‘(1) IN GENERAL.—In the case of a taxable year beginning
after December 31, 2017, and before January 1, 2026—
‘‘(A) subsection (i) shall not apply, and
‘‘(B) this section (other than subsection (i)) shall be
applied as provided in paragraphs (2) through (6).
‘‘(2) RATE TABLES.—
‘‘(A) MARRIED INDIVIDUALS FILING JOINT RETURNS AND
SURVIVING SPOUSES.—The following table shall be applied
in lieu of the table contained in subsection (a):
‘‘If taxable income is:
The tax is:
Not over $19,050 .............................................
Over $19,050 but not over $77,400 ................
Over $77,400 but not over $165,000 ..............
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Over $165,000 but not over $315,000 ............
Over $315,000 but not over $400,000 ............
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10% of taxable income.
$1,905, plus 12% of the
$19,050.
$8,907, plus 22% of the
$77,400.
$28,179, plus 24% of the
$165,000.
$64,179, plus 32% of the
$315,000.
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PUBL097
excess over
excess over
excess over
excess over
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘If taxable income is:
131 STAT. 2055
The tax is:
Over $400,000 but not over $600,000 ............
$91,379, plus 35% of the excess over
$400,000.
Over $600,000 ................................................. $161,379, plus 37% of the excess over
$600,000.
‘‘(B) HEADS OF HOUSEHOLDS.—The following table shall
be applied in lieu of the table contained in subsection
(b):
‘‘If taxable income is:
The tax is:
Not over $13,600 .............................................
Over $13,600 but not over $51,800 ................
over
Over
over
Over
Over
Over
Over
10% of taxable income.
$1,360, plus 12% of the excess
$13,600.
$51,800 but not over $82,500 ................ $5,944, plus 22% of the excess
$51,800.
$82,500 but not over $157,500 .............. $12,698, plus 24% of the excess
$82,500.
$157,500 but not over $200,000 ............ $30,698, plus 32% of the excess
$157,500.
$200,000 but not over $500,000 ............ $44,298, plus 35% of the excess
$200,000.
$500,000 ................................................. $149,298, plus 37% of the excess
$500,000.
over
over
over
over
‘‘(C) UNMARRIED INDIVIDUALS OTHER THAN SURVIVING
SPOUSES AND HEADS OF HOUSEHOLDS.—The following table
shall be applied in lieu of the table contained in subsection
(c):
‘‘If taxable income is:
The tax is:
Not over $9,525 ...............................................
Over $9,525 but not over $38,700 ..................
Over
Over
Over
Over
Over
10% of taxable income.
$952.50, plus 12% of the excess over
$9,525.
$38,700 but not over $82,500 ................ $4,453.50, plus 22% of the excess
over $38,700.
$82,500 but not over $157,500 .............. $14,089.50, plus 24% of the excess
over $82,500.
$157,500 but not over $200,000 ............ $32,089.50, plus 32% of the excess
over $157,500.
$200,000 but not over $500,000 ............ $45,689.50, plus 35% of the excess
over $200,000.
$500,000 ................................................. $150,689.50, plus 37% of the excess
over $500,000.
‘‘(D)
MARRIED
INDIVIDUALS
RETURNS.—The following table shall
FILING
SEPARATE
be applied in lieu of
the table contained in subsection (d):
‘‘If taxable income is:
The tax is:
Not over $9,525 ...............................................
Over $9,525 but not over $38,700 ..................
Over $38,700 but not over $82,500 ................
Over $82,500 but not over $157,500 ..............
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Over $157,500 but not over $200,000 ............
Over $200,000 but not over $300,000 ............
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10% of taxable income.
$952.50, plus 12% of the
$9,525.
$4,453.50, plus 22% of
over $38,700.
$14,089.50, plus 24% of
over $82,500.
$32,089.50, plus 32% of
over $157,500.
$45,689.50, plus 35% of
over $200,000.
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excess over
the excess
the excess
the excess
the excess
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PUBL097
131 STAT. 2056
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘If taxable income is:
The tax is:
Over $300,000 ................................................. $80,689.50, plus 37% of the excess
over $300,000.
‘‘(E) ESTATES AND TRUSTS.—The following table shall
be applied in lieu of the table contained in subsection
(e):
‘‘If taxable income is:
The tax is:
Not over $2,550 ...............................................
Over $2,550 but not over $9,150 ....................
Over $9,150 but not over $12,500 ..................
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Over $12,500 ...................................................
10% of taxable income.
$255, plus 24% of the excess over
$2,550.
$1,839, plus 35% of the excess over
$9,150.
$3,011.50, plus 37% of the excess
over $12,500.
‘‘(F) REFERENCES TO RATE TABLES.—Any reference in
this title to a rate of tax under subsection (c) shall be
treated as a reference to the corresponding rate bracket
under subparagraph (C) of this paragraph, except that
the reference in section 3402(q)(1) to the third lowest rate
of tax applicable under subsection (c) shall be treated as
a reference to the fourth lowest rate of tax under subparagraph (C).
‘‘(3) ADJUSTMENTS.—
‘‘(A) NO ADJUSTMENT IN 2018.—The tables contained
in paragraph (2) shall apply without adjustment for taxable
years beginning after December 31, 2017, and before
January 1, 2019.
‘‘(B) SUBSEQUENT YEARS.—For taxable years beginning
after December 31, 2018, the Secretary shall prescribe
tables which shall apply in lieu of the tables contained
in paragraph (2) in the same manner as under paragraphs
(1) and (2) of subsection (f) (applied without regard to
clauses (i) and (ii) of subsection (f)(2)(A)), except that in
prescribing such tables—
‘‘(i) subsection (f)(3) shall be applied by substituting ‘calendar year 2017’ for ‘calendar year 2016’
in subparagraph (A)(ii) thereof,
‘‘(ii) subsection (f)(7)(B) shall apply to any
unmarried individual other than a surviving spouse
or head of household, and
‘‘(iii) subsection (f)(8) shall not apply.
‘‘(4) SPECIAL RULES FOR CERTAIN CHILDREN WITH UNEARNED
INCOME.—
‘‘(A) IN GENERAL.—In the case of a child to whom
subsection (g) applies for the taxable year, the rules of
subparagraphs (B) and (C) shall apply in lieu of the rule
under subsection (g)(1).
‘‘(B) MODIFICATIONS TO APPLICABLE RATE BRACKETS.—
In determining the amount of tax imposed by this section
for the taxable year on a child described in subparagraph
(A), the income tax table otherwise applicable under this
subsection to the child shall be applied with the following
modifications:
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2057
‘‘(i) 24-PERCENT BRACKET.—The maximum taxable
income which is taxed at a rate below 24 percent
shall not be more than the sum of—
‘‘(I) the earned taxable income of such child,
plus
‘‘(II) the minimum taxable income for the 24percent bracket in the table under paragraph
(2)(E) (as adjusted under paragraph (3)) for the
taxable year.
‘‘(ii) 35-PERCENT BRACKET.—The maximum taxable
income which is taxed at a rate below 35 percent
shall not be more than the sum of—
‘‘(I) the earned taxable income of such child,
plus
‘‘(II) the minimum taxable income for the 35percent bracket in the table under paragraph
(2)(E) (as adjusted under paragraph (3)) for the
taxable year.
‘‘(iii) 37-PERCENT BRACKET.—The maximum taxable
income which is taxed at a rate below 37 percent
shall not be more than the sum of—
‘‘(I) the earned taxable income of such child,
plus
‘‘(II) the minimum taxable income for the 37percent bracket in the table under paragraph
(2)(E) (as adjusted under paragraph (3)) for the
taxable year.
‘‘(C) COORDINATION WITH CAPITAL GAINS RATES.—For
purposes of applying section 1(h) (after the modifications
under paragraph (5)(A))—
‘‘(i) the maximum zero rate amount shall not be
more than the sum of—
‘‘(I) the earned taxable income of such child,
plus
‘‘(II) the amount in effect under paragraph
(5)(B)(i)(IV) for the taxable year, and
‘‘(ii) the maximum 15-percent rate amount shall
not be more than the sum of—
‘‘(I) the earned taxable income of such child,
plus
‘‘(II) the amount in effect under paragraph
(5)(B)(ii)(IV) for the taxable year.
‘‘(D) EARNED TAXABLE INCOME.—For purposes of this
paragraph, the term ‘earned taxable income’ means, with
respect to any child for any taxable year, the taxable income
of such child reduced (but not below zero) by the net
unearned income (as defined in subsection (g)(4)) of such
child.
‘‘(5) APPLICATION OF CURRENT INCOME TAX BRACKETS TO
CAPITAL GAINS BRACKETS.—
‘‘(A) IN GENERAL.—Section 1(h)(1) shall be applied—
‘‘(i) by substituting ‘below the maximum zero rate
amount’ for ‘which would (without regard to this paragraph) be taxed at a rate below 25 percent’ in subparagraph (B)(i), and
‘‘(ii) by substituting ‘below the maximum 15-percent rate amount’ for ‘which would (without regard
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131 STAT. 2058
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26 USC 6695.
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PUBLIC LAW 115–97—DEC. 22, 2017
to this paragraph) be taxed at a rate below 39.6 percent’ in subparagraph (C)(ii)(I).
‘‘(B) MAXIMUM AMOUNTS DEFINED.—For purposes of
applying section 1(h) with the modifications described in
subparagraph (A)—
‘‘(i) MAXIMUM ZERO RATE AMOUNT.—The maximum
zero rate amount shall be—
‘‘(I) in the case of a joint return or surviving
spouse, $77,200,
‘‘(II) in the case of an individual who is a
head of household (as defined in section 2(b)),
$51,700,
‘‘(III) in the case of any other individual (other
than an estate or trust), an amount equal to 1⁄2
of the amount in effect for the taxable year under
subclause (I), and
‘‘(IV) in the case of an estate or trust, $2,600.
‘‘(ii) MAXIMUM 15-PERCENT RATE AMOUNT.—The
maximum 15-percent rate amount shall be—
‘‘(I) in the case of a joint return or surviving
spouse, $479,000 (1⁄2 such amount in the case of
a married individual filing a separate return),
‘‘(II) in the case of an individual who is the
head of a household (as defined in section 2(b)),
$452,400,
‘‘(III) in the case of any other individual (other
than an estate or trust), $425,800, and
‘‘(IV) in the case of an estate or trust, $12,700.
‘‘(C) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after 2018, each of the dollar amounts
in clauses (i) and (ii) of subparagraph (B) shall be increased
by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment determined
under subsection (f)(3) for the calendar year in which
the taxable year begins, determined by substituting
‘calendar year 2017’ for ‘calendar year 2016’ in
subparagraph (A)(ii) thereof.
If any increase under this subparagraph is not a multiple
of $50, such increase shall be rounded to the next lowest
multiple of $50.
‘‘(6) SECTION 15 NOT TO APPLY.—Section 15 shall not apply
to any change in a rate of tax by reason of this subsection.’’.
(b) DUE DILIGENCE TAX PREPARER REQUIREMENT WITH RESPECT
TO HEAD OF HOUSEHOLD FILING STATUS.—Subsection (g) of section
6695 is amended to read as follows:
‘‘(g) FAILURE TO BE DILIGENT IN DETERMINING ELIGIBILITY FOR
CERTAIN TAX BENEFITS.—Any person who is a tax return preparer
with respect to any return or claim for refund who fails to comply
with due diligence requirements imposed by the Secretary by regulations with respect to determining—
‘‘(1) eligibility to file as a head of household (as defined
in section 2(b)) on the return, or
‘‘(2) eligibility for, or the amount of, the credit allowable
by section 24, 25A(a)(1), or 32,
shall pay a penalty of $500 for each such failure.’’.
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2059
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 1 note.
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SEC. 11002. INFLATION ADJUSTMENTS BASED ON CHAINED CPI.
(a) IN GENERAL.—Subsection (f) of section 1 is amended by
striking paragraph (3) and by inserting after paragraph (2) the
following new paragraph:
‘‘(3) COST-OF-LIVING ADJUSTMENT.—For purposes of this
subsection—
‘‘(A) IN GENERAL.—The cost-of-living adjustment for
any calendar year is the percentage (if any) by which—
‘‘(i) the C-CPI-U for the preceding calendar year,
exceeds
‘‘(ii) the CPI for calendar year 2016, multiplied
by the amount determined under subparagraph (B).
‘‘(B) AMOUNT DETERMINED.—The amount determined
under this clause is the amount obtained by dividing—
‘‘(i) the C-CPI-U for calendar year 2016, by
‘‘(ii) the CPI for calendar year 2016.
‘‘(C) SPECIAL RULE FOR ADJUSTMENTS WITH A BASE YEAR
AFTER 2016.—For purposes of any provision of this title
which provides for the substitution of a year after 2016
for ‘2016’ in subparagraph (A)(ii), subparagraph (A) shall
be applied by substituting ‘the C-CPI-U for calendar year
2016’ for ‘the CPI for calendar year 2016’ and all that
follows in clause (ii) thereof.’’.
(b) C-CPI-U.—Subsection (f) of section 1 is amended by striking
paragraph (7), by redesignating paragraph (6) as paragraph (7),
and by inserting after paragraph (5) the following new paragraph:
‘‘(6) C-CPI-U.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘C-CPI-U’ means the
Chained Consumer Price Index for All Urban Consumers
(as published by the Bureau of Labor Statistics of the
Department of Labor). The values of the Chained Consumer
Price Index for All Urban Consumers taken into account
for purposes of determining the cost-of-living adjustment
for any calendar year under this subsection shall be the
latest values so published as of the date on which such
Bureau publishes the initial value of the Chained Consumer Price Index for All Urban Consumers for the month
of August for the preceding calendar year.
‘‘(B) DETERMINATION FOR CALENDAR YEAR.—The C-CPIU for any calendar year is the average of the C-CPIU as of the close of the 12-month period ending on August
31 of such calendar year.’’.
(c) APPLICATION TO PERMANENT TAX TABLES.—
(1) IN GENERAL.—Section 1(f)(2)(A) is amended to read as
follows:
‘‘(A) except as provided in paragraph (8), by increasing
the minimum and maximum dollar amounts for each
bracket for which a tax is imposed under such table by
the cost-of-living adjustment for such calendar year, determined—
‘‘(i) except as provided in clause (ii), by substituting
‘1992’ for ‘2016’ in paragraph (3)(A)(ii), and
‘‘(ii) in the case of adjustments to the dollar
amounts at which the 36 percent rate bracket begins
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26 USC 1.
PUBL097
131 STAT. 2060
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26 USC 1.
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PUBLIC LAW 115–97—DEC. 22, 2017
or at which the 39.6 percent rate bracket begins, by
substituting ‘1993’ for ‘2016’ in paragraph (3)(A)(ii),’’.
(2) CONFORMING AMENDMENTS.—Section 1(i) is amended—
(A) by striking ‘‘for ‘1992’ in subparagraph (B)’’ in
paragraph (1)(C) and inserting ‘‘for ‘2016’ in subparagraph
(A)(ii)’’, and
(B) by striking ‘‘subsection (f)(3)(B) shall be applied
by substituting ‘2012’ for ‘1992’ ’’ in paragraph (3)(C) and
inserting ‘‘subsection (f)(3)(A)(ii) shall be applied by substituting ‘2012’ for ‘2016’ ’’.
(d) APPLICATION TO OTHER INTERNAL REVENUE CODE OF 1986
PROVISIONS.—
(1) The following sections are each amended by striking
‘‘for ‘calendar year 1992’ in subparagraph (B)’’ and inserting
‘‘for ‘calendar year 2016’ in subparagraph (A)(ii)’’:
(A) Section 23(h)(2).
(B) Paragraphs (1)(A)(ii) and (2)(A)(ii) of section 25A(h).
(C) Section 25B(b)(3)(B).
(D) Subsection (b)(2)(B)(ii)(II), and clauses (i) and (ii)
of subsection (j)(1)(B), of section 32.
(E) Section 36B(f)(2)(B)(ii)(II).
(F) Section 41(e)(5)(C)(i).
(G) Subsections (e)(3)(D)(ii) and (h)(3)(H)(i)(II) of section 42.
(H) Section 45R(d)(3)(B)(ii).
(I) Section 55(d)(4)(A)(ii).
(J) Section 62(d)(3)(B).
(K) Section 63(c)(4)(B).
(L) Section 125(i)(2)(B).
(M) Section 135(b)(2)(B)(ii).
(N) Section 137(f)(2).
(O) Section 146(d)(2)(B).
(P) Section 147(c)(2)(H)(ii).
(Q) Section 151(d)(4)(B).
(R) Section 179(b)(6)(A)(ii).
(S) Subsections (b)(5)(C)(i)(II) and (g)(8)(B) of section
219.
(T) Section 220(g)(2).
(U) Section 221(f)(1)(B).
(V) Section 223(g)(1)(B).
(W) Section 408A(c)(3)(D)(ii).
(X) Section 430(c)(7)(D)(vii)(II).
(Y) Section 512(d)(2)(B).
(Z) Section 513(h)(2)(C)(ii).
(AA) Section 831(b)(2)(D)(ii).
(BB) Section 877A(a)(3)(B)(i)(II).
(CC) Section 2010(c)(3)(B)(ii).
(DD) Section 2032A(a)(3)(B).
(EE) Section 2503(b)(2)(B).
(FF) Section 4261(e)(4)(A)(ii).
(GG) Section 5000A(c)(3)(D)(ii).
(HH) Section 6323(i)(4)(B).
(II) Section 6334(g)(1)(B).
(JJ) Section 6601(j)(3)(B).
(KK) Section 6651(i)(1).
(LL) Section 6652(c)(7)(A).
(MM) Section 6695(h)(1).
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2061
(NN) Section 6698(e)(1).
(OO) Section 6699(e)(1).
(PP) Section 6721(f)(1).
(QQ) Section 6722(f)(1).
(RR) Section 7345(f)(2).
(SS) Section 7430(c)(1).
(TT) Section 9831(d)(2)(D)(ii)(II).
(2) Sections 41(e)(5)(C)(ii) and 68(b)(2)(B) are each
amended—
(A) by striking ‘‘1(f)(3)(B)’’ and inserting ‘‘1(f)(3)(A)(ii)’’,
and
(B) by striking ‘‘1992’’ and inserting ‘‘2016’’.
(3) Section 42(h)(6)(G) is amended—
(A) by striking ‘‘for ‘calendar year 1987’ ’’ in clause
(i)(II) and inserting ‘‘for ‘calendar year 2016’ in subparagraph (A)(ii) thereof’’, and
(B) by striking ‘‘if the CPI for any calendar year’’
and all that follows in clause (ii) and inserting ‘‘if the
C-CPI-U for any calendar year (as defined in section 1(f)(6))
exceeds the C-CPI-U for the preceding calendar year by
more than 5 percent, the C-CPI-U for the base calendar
year shall be increased such that such excess shall never
be taken into account under clause (i). In the case of
a base calendar year before 2017, the C-CPI-U for such
year shall be determined by multiplying the CPI for such
year by the amount determined under section 1(f)(3)(B).’’.
(4) Section 59(j)(2)(B) is amended by striking ‘‘for ‘1992’
in subparagraph (B)’’ and inserting ‘‘for ‘2016’ in subparagraph
(A)(ii)’’.
(5) Section 132(f)(6)(A)(ii) is amended by striking ‘‘for ‘calendar year 1992’ ’’ and inserting ‘‘for ‘calendar year 2016’ in
subparagraph (A)(ii) thereof’’.
(6) Section 162(o)(3) is amended by striking ‘‘adjusted for
changes in the Consumer Price Index (as defined in section
1(f)(5)) since 1991’’ and inserting ‘‘adjusted by increasing any
such amount under the 1991 agreement by an amount equal
to—
‘‘(A) such amount, multiplied by
‘‘(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting ‘calendar year 1990’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof’’.
(7) So much of clause (ii) of section 213(d)(10)(B) as precedes the last sentence is amended to read as follows:
‘‘(ii) MEDICAL CARE COST ADJUSTMENT.—For purposes of clause (i), the medical care cost adjustment
for any calendar year is the percentage (if any) by
which—
‘‘(I) the medical care component of the C-CPIU (as defined in section 1(f)(6)) for August of the
preceding calendar year, exceeds
‘‘(II) such component of the CPI (as defined
in section 1(f)(4)) for August of 1996, multiplied
by the amount determined under section
1(f)(3)(B).’’.
(8) Subparagraph (B) of section 280F(d)(7) is amended to
read as follows:
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26 USC 41, 68.
PUBL097
131 STAT. 2062
‘‘(B) AUTOMOBILE PRICE INFLATION ADJUSTMENT.—For
purposes of this paragraph—
‘‘(i) IN GENERAL.—The automobile price inflation
adjustment for any calendar year is the percentage
(if any) by which—
‘‘(I) the C-CPI-U automobile component for
October of the preceding calendar year, exceeds
‘‘(II) the automobile component of the CPI (as
defined in section 1(f)(4)) for October of 1987,
multiplied by the amount determined under
1(f)(3)(B).
‘‘(ii) C-CPI-U AUTOMOBILE COMPONENT.—The term
‘C-CPI-U automobile component’ means the automobile
component of the Chained Consumer Price Index for
All Urban Consumers (as described in section 1(f)(6)).’’.
(9) Section 911(b)(2)(D)(ii)(II) is amended by striking ‘‘for
‘1992’ in subparagraph (B)’’ and inserting ‘‘for ‘2016’ in subparagraph (A)(ii)’’.
(10) Paragraph (2) of section 1274A(d) is amended to read
as follows:
‘‘(2) ADJUSTMENT FOR INFLATION.—In the case of any debt
instrument arising out of a sale or exchange during any calendar year after 1989, each dollar amount contained in the
preceding provisions of this section shall be increased by an
amount equal to—
‘‘(A) such amount, multiplied by
‘‘(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting ‘calendar year 1988’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
Any increase under the preceding sentence shall be rounded
to the nearest multiple of $100 (or, if such increase is a multiple
of $50, such increase shall be increased to the nearest multiple
of $100).’’.
(11) Section 4161(b)(2)(C)(i)(II) is amended by striking ‘‘for
‘1992’ in subparagraph (B)’’ and inserting ‘‘for ‘2016’ in subparagraph (A)(ii)’’.
(12) Section 4980I(b)(3)(C)(v)(II) is amended by striking
‘‘for ‘1992’ in subparagraph (B)’’ and inserting ‘‘for ‘2016’ in
subparagraph (A)(ii)’’.
(13) Section 6039F(d) is amended by striking ‘‘subparagraph (B) thereof shall be applied by substituting ‘1995’ for
‘1992’ ’’ and inserting ‘‘subparagraph (A)(ii) thereof shall be
applied by substituting ‘1995’ for ‘2016’ ’’.
(14) Section 7872(g)(5) is amended to read as follows:
‘‘(5) ADJUSTMENT OF LIMIT FOR INFLATION.—In the case
of any loan made during any calendar year after 1986, the
dollar amount in paragraph (2) shall be increased by an amount
equal to—
‘‘(A) such amount, multiplied by
‘‘(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting ‘calendar year 1985’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
Any increase under the preceding sentence shall be rounded
to the nearest multiple of $100 (or, if such increase is a multiple
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of $50, such increase shall be increased to the nearest multiple
of $100).’’.
(e) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 1 note.
PART II—DEDUCTION FOR QUALIFIED
BUSINESS INCOME OF PASS-THRU ENTITIES
SEC. 11011. DEDUCTION FOR QUALIFIED BUSINESS INCOME.
(a) IN GENERAL.—Part VI of subchapter B of chapter 1 is
amended by adding at the end the following new section:
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‘‘SEC. 199A. QUALIFIED BUSINESS INCOME.
26 USC 199A.
‘‘(a) IN GENERAL.—In the case of a taxpayer other than a
corporation, there shall be allowed as a deduction for any taxable
year an amount equal to the sum of—
‘‘(1) the lesser of—
‘‘(A) the combined qualified business income amount
of the taxpayer, or
‘‘(B) an amount equal to 20 percent of the excess (if
any) of—
‘‘(i) the taxable income of the taxpayer for the
taxable year, over
‘‘(ii) the sum of any net capital gain (as defined
in section 1(h)), plus the aggregate amount of the qualified cooperative dividends, of the taxpayer for the taxable year, plus
‘‘(2) the lesser of—
‘‘(A) 20 percent of the aggregate amount of the qualified
cooperative dividends of the taxpayer for the taxable year,
or
‘‘(B) taxable income (reduced by the net capital gain
(as so defined)) of the taxpayer for the taxable year.
The amount determined under the preceding sentence shall not
exceed the taxable income (reduced by the net capital gain (as
so defined)) of the taxpayer for the taxable year.
‘‘(b) COMBINED QUALIFIED BUSINESS INCOME AMOUNT.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘combined qualified business
income amount’ means, with respect to any taxable year, an
amount equal to—
‘‘(A) the sum of the amounts determined under paragraph (2) for each qualified trade or business carried on
by the taxpayer, plus
‘‘(B) 20 percent of the aggregate amount of the qualified
REIT dividends and qualified publicly traded partnership
income of the taxpayer for the taxable year.
‘‘(2) DETERMINATION OF DEDUCTIBLE AMOUNT FOR EACH
TRADE OR BUSINESS.—The amount determined under this paragraph with respect to any qualified trade or business is the
lesser of—
‘‘(A) 20 percent of the taxpayer’s qualified business
income with respect to the qualified trade or business,
or
‘‘(B) the greater of—
‘‘(i) 50 percent of the W–2 wages with respect
to the qualified trade or business, or
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PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(ii) the sum of 25 percent of the W–2 wages with
respect to the qualified trade or business, plus 2.5
percent of the unadjusted basis immediately after
acquisition of all qualified property.
‘‘(3) MODIFICATIONS TO LIMIT BASED ON TAXABLE INCOME.—
‘‘(A) EXCEPTION FROM LIMIT.—In the case of any taxpayer whose taxable income for the taxable year does not
exceed the threshold amount, paragraph (2) shall be applied
without regard to subparagraph (B).
‘‘(B) PHASE-IN OF LIMIT FOR CERTAIN TAXPAYERS.—
‘‘(i) IN GENERAL.—If—
‘‘(I) the taxable income of a taxpayer for any
taxable year exceeds the threshold amount, but
does not exceed the sum of the threshold amount
plus $50,000 ($100,000 in the case of a joint
return), and
‘‘(II) the amount determined under paragraph
(2)(B) (determined without regard to this subparagraph) with respect to any qualified trade or business carried on by the taxpayer is less than the
amount determined under paragraph (2)(A) with
respect such trade or business,
then paragraph (2) shall be applied with respect to
such trade or business without regard to subparagraph
(B) thereof and by reducing the amount determined
under subparagraph (A) thereof by the amount determined under clause (ii).
‘‘(ii) AMOUNT OF REDUCTION.—The amount determined under this subparagraph is the amount which
bears the same ratio to the excess amount as—
‘‘(I) the amount by which the taxpayer’s taxable income for the taxable year exceeds the
threshold amount, bears to
‘‘(II) $50,000 ($100,000 in the case of a joint
return).
‘‘(iii) EXCESS AMOUNT.—For purposes of clause (ii),
the excess amount is the excess of—
‘‘(I) the amount determined under paragraph
(2)(A) (determined without regard to this paragraph), over
‘‘(II) the amount determined under paragraph
(2)(B) (determined without regard to this paragraph).
‘‘(4) WAGES, ETC.—
‘‘(A) IN GENERAL.—The term ‘W–2 wages’ means, with
respect to any person for any taxable year of such person,
the amounts described in paragraphs (3) and (8) of section
6051(a) paid by such person with respect to employment
of employees by such person during the calendar year
ending during such taxable year.
‘‘(B) LIMITATION TO WAGES ATTRIBUTABLE TO QUALIFIED
BUSINESS INCOME.—Such term shall not include any
amount which is not properly allocable to qualified business
income for purposes of subsection (c)(1).
‘‘(C) RETURN REQUIREMENT.—Such term shall not
include any amount which is not properly included in a
return filed with the Social Security Administration on
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or before the 60th day after the due date (including extensions) for such return.
‘‘(5) ACQUISITIONS, DISPOSITIONS, AND SHORT TAXABLE
YEARS.—The Secretary shall provide for the application of this
subsection in cases of a short taxable year or where the taxpayer acquires, or disposes of, the major portion of a trade
or business or the major portion of a separate unit of a trade
or business during the taxable year.
‘‘(6) QUALIFIED PROPERTY.—For purposes of this section:
‘‘(A) IN GENERAL.—The term ‘qualified property’ means,
with respect to any qualified trade or business for a taxable
year, tangible property of a character subject to the allowance for depreciation under section 167—
‘‘(i) which is held by, and available for use in,
the qualified trade or business at the close of the
taxable year,
‘‘(ii) which is used at any point during the taxable
year in the production of qualified business income,
and
‘‘(iii) the depreciable period for which has not
ended before the close of the taxable year.
‘‘(B) DEPRECIABLE PERIOD.—The term ‘depreciable
period’ means, with respect to qualified property of a taxpayer, the period beginning on the date the property was
first placed in service by the taxpayer and ending on the
later of—
‘‘(i) the date that is 10 years after such date,
or
‘‘(ii) the last day of the last full year in the
applicable recovery period that would apply to the
property under section 168 (determined without regard
to subsection (g) thereof).
‘‘(c) QUALIFIED BUSINESS INCOME.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified business income’
means, for any taxable year, the net amount of qualified items
of income, gain, deduction, and loss with respect to any qualified
trade or business of the taxpayer. Such term shall not include
any qualified REIT dividends, qualified cooperative dividends,
or qualified publicly traded partnership income.
‘‘(2) CARRYOVER OF LOSSES.—If the net amount of qualified
income, gain, deduction, and loss with respect to qualified
trades or businesses of the taxpayer for any taxable year is
less than zero, such amount shall be treated as a loss from
a qualified trade or business in the succeeding taxable year.
‘‘(3) QUALIFIED ITEMS OF INCOME, GAIN, DEDUCTION, AND
LOSS.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘qualified items of income,
gain, deduction, and loss’ means items of income, gain,
deduction, and loss to the extent such items are—
‘‘(i) effectively connected with the conduct of a
trade or business within the United States (within
the meaning of section 864(c), determined by substituting ‘qualified trade or business (within the
meaning of section 199A)’ for ‘nonresident alien individual or a foreign corporation’ or for ‘a foreign corporation’ each place it appears), and
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131 STAT. 2066
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(ii) included or allowed in determining taxable
income for the taxable year.
‘‘(B) EXCEPTIONS.—The following investment items
shall not be taken into account as a qualified item of
income, gain, deduction, or loss:
‘‘(i) Any item of short-term capital gain, shortterm capital loss, long-term capital gain, or long-term
capital loss.
‘‘(ii) Any dividend, income equivalent to a dividend,
or payment in lieu of dividends described in section
954(c)(1)(G).
‘‘(iii) Any interest income other than interest
income which is properly allocable to a trade or business.
‘‘(iv) Any item of gain or loss described in subparagraph (C) or (D) of section 954(c)(1) (applied by substituting ‘qualified trade or business’ for ‘controlled
foreign corporation’).
‘‘(v) Any item of income, gain, deduction, or loss
taken into account under section 954(c)(1)(F) (determined without regard to clause (ii) thereof and other
than items attributable to notional principal contracts
entered into in transactions qualifying under section
1221(a)(7)).
‘‘(vi) Any amount received from an annuity which
is not received in connection with the trade or business.
‘‘(vii) Any item of deduction or loss properly allocable to an amount described in any of the preceding
clauses.
‘‘(4) TREATMENT OF REASONABLE COMPENSATION AND
GUARANTEED PAYMENTS.—Qualified business income shall not
include—
‘‘(A) reasonable compensation paid to the taxpayer by
any qualified trade or business of the taxpayer for services
rendered with respect to the trade or business,
‘‘(B) any guaranteed payment described in section
707(c) paid to a partner for services rendered with respect
to the trade or business, and
‘‘(C) to the extent provided in regulations, any payment
described in section 707(a) to a partner for services rendered with respect to the trade or business.
‘‘(d) QUALIFIED TRADE OR BUSINESS.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified trade or business’
means any trade or business other than—
‘‘(A) a specified service trade or business, or
‘‘(B) the trade or business of performing services as
an employee.
‘‘(2) SPECIFIED SERVICE TRADE OR BUSINESS.—The term
‘specified service trade or business’ means any trade or business—
‘‘(A) which is described in section 1202(e)(3)(A) (applied
without regard to the words ‘engineering, architecture,’)
or which would be so described if the term ‘employees
or owners’ were substituted for ‘employees’ therein, or
‘‘(B) which involves the performance of services that
consist of investing and investment management, trading,
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131 STAT. 2067
or dealing in securities (as defined in section 475(c)(2)),
partnership interests, or commodities (as defined in section
475(e)(2)).
‘‘(3) EXCEPTION FOR SPECIFIED SERVICE BUSINESSES BASED
ON TAXPAYER’S INCOME.—
‘‘(A) IN GENERAL.—If, for any taxable year, the taxable
income of any taxpayer is less than the sum of the threshold
amount plus $50,000 ($100,000 in the case of a joint
return), then—
‘‘(i) any specified service trade or business of the
taxpayer shall not fail to be treated as a qualified
trade or business due to paragraph (1)(A), but
‘‘(ii) only the applicable percentage of qualified
items of income, gain, deduction, or loss, and the W–
2 wages and the unadjusted basis immediately after
acquisition of qualified property, of the taxpayer allocable to such specified service trade or business shall
be taken into account in computing the qualified business income, W–2 wages, and the unadjusted basis
immediately after acquisition of qualified property of
the taxpayer for the taxable year for purposes of
applying this section.
‘‘(B) APPLICABLE PERCENTAGE.—For purposes of
subparagraph (A), the term ‘applicable percentage’ means,
with respect to any taxable year, 100 percent reduced (not
below zero) by the percentage equal to the ratio of—
‘‘(i) the taxable income of the taxpayer for the
taxable year in excess of the threshold amount, bears
to
‘‘(ii) $50,000 ($100,000 in the case of a joint return).
‘‘(e) OTHER DEFINITIONS.—For purposes of this section—
‘‘(1) TAXABLE INCOME.—Taxable income shall be computed
without regard to the deduction allowable under this section.
‘‘(2) THRESHOLD AMOUNT.—
‘‘(A) IN GENERAL.—The term ‘threshold amount’ means
$157,500 (200 percent of such amount in the case of a
joint return).
‘‘(B) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after 2018, the dollar amount in
subparagraph (A) shall be increased by an amount equal
to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting
‘calendar year 2017’ for ‘calendar year 2016’ in
subparagraph (A)(ii) thereof.
The amount of any increase under the preceding sentence
shall be rounded as provided in section 1(f)(7).
‘‘(3) QUALIFIED REIT DIVIDEND.—The term ‘qualified REIT
dividend’ means any dividend from a real estate investment
trust received during the taxable year which—
‘‘(A) is not a capital gain dividend, as defined in section
857(b)(3), and
‘‘(B) is not qualified dividend income, as defined in
section 1(h)(11).
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PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(4) QUALIFIED COOPERATIVE DIVIDEND.—The term ‘qualified cooperative dividend’ means any patronage dividend (as
defined in section 1388(a)), any per-unit retain allocation (as
defined in section 1388(f)), and any qualified written notice
of allocation (as defined in section 1388(c)), or any similar
amount received from an organization described in subparagraph (B)(ii), which—
‘‘(A) is includible in gross income, and
‘‘(B) is received from—
‘‘(i) an organization or corporation described in
section 501(c)(12) or 1381(a), or
‘‘(ii) an organization which is governed under this
title by the rules applicable to cooperatives under this
title before the enactment of subchapter T.
‘‘(5) QUALIFIED PUBLICLY TRADED PARTNERSHIP INCOME.—
The term ‘qualified publicly traded partnership income’ means,
with respect to any qualified trade or business of a taxpayer,
the sum of—
‘‘(A) the net amount of such taxpayer’s allocable share
of each qualified item of income, gain, deduction, and loss
(as defined in subsection (c)(3) and determined after the
application of subsection (c)(4)) from a publicly traded partnership (as defined in section 7704(a)) which is not treated
as a corporation under section 7704(c), plus
‘‘(B) any gain recognized by such taxpayer upon disposition of its interest in such partnership to the extent such
gain is treated as an amount realized from the sale or
exchange of property other than a capital asset under section 751(a).
‘‘(f) SPECIAL RULES.—
‘‘(1) APPLICATION TO PARTNERSHIPS AND S CORPORATIONS.—
‘‘(A) IN GENERAL.—In the case of a partnership or
S corporation—
‘‘(i) this section shall be applied at the partner
or shareholder level,
‘‘(ii) each partner or shareholder shall take into
account such person’s allocable share of each qualified
item of income, gain, deduction, and loss, and
‘‘(iii) each partner or shareholder shall be treated
for purposes of subsection (b) as having W–2 wages
and unadjusted basis immediately after acquisition of
qualified property for the taxable year in an amount
equal to such person’s allocable share of the W–2 wages
and the unadjusted basis immediately after acquisition
of qualified property of the partnership or S corporation
for the taxable year (as determined under regulations
prescribed by the Secretary).
For purposes of clause (iii), a partner’s or shareholder’s
allocable share of W–2 wages shall be determined in the
same manner as the partner’s or shareholder’s allocable
share of wage expenses. For purposes of such clause, partner’s or shareholder’s allocable share of the unadjusted
basis immediately after acquisition of qualified property
shall be determined in the same manner as the partner’s
or shareholder’s allocable share of depreciation. For purposes of this subparagraph, in the case of an S corporation,
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131 STAT. 2069
an allocable share shall be the shareholder’s pro rata share
of an item.
‘‘(B) APPLICATION TO TRUSTS AND ESTATES.—Rules
similar to the rules under section 199(d)(1)(B)(i) (as in
effect on December 1, 2017) for the apportionment of W–
2 wages shall apply to the apportionment of W–2 wages
and the apportionment of unadjusted basis immediately
after acquisition of qualified property under this section.
‘‘(C) TREATMENT OF TRADES OR BUSINESS IN PUERTO
RICO.—
‘‘(i) IN GENERAL.—In the case of any taxpayer with
qualified business income from sources within the
commonwealth of Puerto Rico, if all such income is
taxable under section 1 for such taxable year, then
for purposes of determining the qualified business
income of such taxpayer for such taxable year, the
term ‘United States’ shall include the Commonwealth
of Puerto Rico.
‘‘(ii) SPECIAL RULE FOR APPLYING LIMIT.—In the
case of any taxpayer described in clause (i), the determination of W–2 wages of such taxpayer with respect
to any qualified trade or business conducted in Puerto
Rico shall be made without regard to any exclusion
under section 3401(a)(8) for remuneration paid for services in Puerto Rico.
‘‘(2) COORDINATION WITH MINIMUM TAX.—For purposes of
determining alternative minimum taxable income under section
55, qualified business income shall be determined without
regard to any adjustments under sections 56 through 59.
‘‘(3) DEDUCTION LIMITED TO INCOME TAXES.—The deduction
under subsection (a) shall only be allowed for purposes of
this chapter.
‘‘(4) REGULATIONS.—The Secretary shall prescribe such
regulations as are necessary to carry out the purposes of this
section, including regulations—
‘‘(A) for requiring or restricting the allocation of items
and wages under this section and such reporting requirements as the Secretary determines appropriate, and
‘‘(B) for the application of this section in the case
of tiered entities.
‘‘(g) DEDUCTION ALLOWED TO SPECIFIED AGRICULTURAL OR
HORTICULTURAL COOPERATIVES.—
‘‘(1) IN GENERAL.—In the case of any taxable year of a
specified agricultural or horticultural cooperative beginning
after December 31, 2017, there shall be allowed a deduction
in an amount equal to the lesser of—
‘‘(A) 20 percent of the excess (if any) of—
‘‘(i) the gross income of a specified agricultural
or horticultural cooperative, over
‘‘(ii) the qualified cooperative dividends (as defined
in subsection (e)(4)) paid during the taxable year for
the taxable year, or
‘‘(B) the greater of—
‘‘(i) 50 percent of the W–2 wages of the cooperative
with respect to its trade or business, or
‘‘(ii) the sum of 25 percent of the W–2 wages of
the cooperative with respect to its trade or business,
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plus 2.5 percent of the unadjusted basis immediately
after acquisition of all qualified property of the cooperative.
‘‘(2) LIMITATION.—The amount determined under paragraph (1) shall not exceed the taxable income of the specified
agricultural or horticultural for the taxable year.
‘‘(3) SPECIFIED AGRICULTURAL OR HORTICULTURAL COOPERATIVE.—For purposes of this subsection, the term ‘specified agricultural or horticultural cooperative’ means an organization
to which part I of subchapter T applies which is engaged
in—
‘‘(A) the manufacturing, production, growth, or extraction in whole or significant part of any agricultural or
horticultural product,
‘‘(B) the marketing of agricultural or horticultural products which its patrons have so manufactured, produced,
grown, or extracted, or
‘‘(C) the provision of supplies, equipment, or services
to farmers or to organizations described in subparagraph
(A) or (B).
‘‘(h) ANTI-ABUSE RULES.—The Secretary shall—
‘‘(1) apply rules similar to the rules under section 179(d)(2)
in order to prevent the manipulation of the depreciable period
of qualified property using transactions between related parties,
and
‘‘(2) prescribe rules for determining the unadjusted basis
immediately after acquisition of qualified property acquired
in like-kind exchanges or involuntary conversions.
‘‘(i) TERMINATION.—This section shall not apply to taxable years
beginning after December 31, 2025.’’.
(b) TREATMENT OF DEDUCTION IN COMPUTING ADJUSTED GROSS
AND TAXABLE INCOME.—
(1) DEDUCTION NOT ALLOWED IN COMPUTING ADJUSTED
GROSS INCOME.—Section 62(a) is amended by adding at the
end the following new sentence: ‘‘The deduction allowed by
section 199A shall not be treated as a deduction described
in any of the preceding paragraphs of this subsection.’’.
(2) DEDUCTION ALLOWED TO NONITEMIZERS.—Section 63(b)
is amended by striking ‘‘and’’ at the end of paragraph (1),
by striking the period at the end of paragraph (2) and inserting
‘‘, and’’, and by adding at the end the following new paragraph:
‘‘(3) the deduction provided in section 199A.’’.
(3) DEDUCTION ALLOWED TO ITEMIZERS WITHOUT LIMITS ON
ITEMIZED DEDUCTIONS.—Section 63(d) is amended by striking
‘‘and’’ at the end of paragraph (1), by striking the period at
the end of paragraph (2) and inserting ‘‘, and’’, and by adding
at the end the following new paragraph:
‘‘(3) the deduction provided in section 199A.’’.
(4) CONFORMING AMENDMENT.—Section 3402(m)(1) is
amended by inserting ‘‘and the estimated deduction allowed
under section 199A’’ after ‘‘chapter 1’’.
(c) ACCURACY-RELATED PENALTY ON DETERMINATION OF
APPLICABLE PERCENTAGE.—Section 6662(d)(1) is amended by
inserting at the end the following new subparagraph:
‘‘(C) SPECIAL RULE FOR TAXPAYERS CLAIMING SECTION
199A DEDUCTION.—In the case of any taxpayer who claims
the deduction allowed under section 199A for the taxable
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year, subparagraph (A) shall be applied by substituting
‘5 percent’ for ‘10 percent’.’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 172(d) is amended by adding at the end the
following new paragraph:
‘‘(8) QUALIFIED BUSINESS INCOME DEDUCTION.—The deduction under section 199A shall not be allowed.’’.
(2) Section 246(b)(1) is amended by inserting ‘‘199A,’’ before
‘‘243(a)(1)’’.
(3) Section 613(a) is amended by inserting ‘‘and without
the deduction under section 199A’’ after ‘‘and without the deduction under section 199’’.
(4) Section 613A(d)(1) is amended by redesignating subparagraphs (C), (D), and (E) as subparagraphs (D), (E), and
(F), respectively, and by inserting after subparagraph (B), the
following new subparagraph:
‘‘(C) any deduction allowable under section 199A,’’.
(5) Section 170(b)(2)(D) is amended by striking ‘‘and’’ in
clause (iv), by striking the period at the end of clause (v),
and by adding at the end the following new clause:
‘‘(vi) section 199A(g).’’.
(6) The table of sections for part VI of subchapter B of
chapter 1 is amended by inserting at the end the following
new item:
26 USC 172.
26 USC 161 prec.
‘‘Sec. 199A. Qualified business income.’’.
(e) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 62 note.
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SEC. 11012. LIMITATION ON LOSSES FOR TAXPAYERS OTHER THAN
CORPORATIONS.
(a) IN GENERAL.—Section 461 is amended by adding at the
end the following new subsection:
‘‘(l) LIMITATION ON EXCESS BUSINESS LOSSES OF NONCORPORATE
TAXPAYERS.—
‘‘(1) LIMITATION.—In the case of taxable year of a taxpayer
other than a corporation beginning after December 31, 2017,
and before January 1, 2026—
‘‘(A) subsection (j) (relating to limitation on excess farm
losses of certain taxpayers) shall not apply, and
‘‘(B) any excess business loss of the taxpayer for the
taxable year shall not be allowed.
‘‘(2) DISALLOWED LOSS CARRYOVER.—Any loss which is disallowed under paragraph (1) shall be treated as a net operating
loss carryover to the following taxable year under section 172.
‘‘(3) EXCESS BUSINESS LOSS.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘excess business loss’
means the excess (if any) of—
‘‘(i) the aggregate deductions of the taxpayer for
the taxable year which are attributable to trades or
businesses of such taxpayer (determined without
regard to whether or not such deductions are disallowed for such taxable year under paragraph (1)),
over
‘‘(ii) the sum of—
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PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(I) the aggregate gross income or gain of such
taxpayer for the taxable year which is attributable
to such trades or businesses, plus
‘‘(II) $250,000 (200 percent of such amount
in the case of a joint return).
‘‘(B) ADJUSTMENT FOR INFLATION.—In the case of any
taxable year beginning after December 31, 2018, the
$250,000 amount in subparagraph (A)(ii)(II) shall be
increased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting
‘2017’ for ‘2016’ in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall
be rounded to the nearest multiple of $1,000.
‘‘(4) APPLICATION OF SUBSECTION IN CASE OF PARTNERSHIPS
AND S CORPORATIONS.—In the case of a partnership or S corporation—
‘‘(A) this subsection shall be applied at the partner
or shareholder level, and
‘‘(B) each partner’s or shareholder’s allocable share
of the items of income, gain, deduction, or loss of the
partnership or S corporation for any taxable year from
trades or businesses attributable to the partnership or
S corporation shall be taken into account by the partner
or shareholder in applying this subsection to the taxable
year of such partner or shareholder with or within which
the taxable year of the partnership or S corporation ends.
For purposes of this paragraph, in the case of an S corporation,
an allocable share shall be the shareholder’s pro rata share
of an item.
‘‘(5) ADDITIONAL REPORTING.—The Secretary shall prescribe
such additional reporting requirements as the Secretary determines necessary to carry out the purposes of this subsection.
‘‘(6) COORDINATION WITH SECTION 469.—This subsection
shall be applied after the application of section 469.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
PART III—TAX BENEFITS FOR FAMILIES AND
INDIVIDUALS
SEC. 11021. INCREASE IN STANDARD DEDUCTION.
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26 USC 63.
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(a) IN GENERAL.—Subsection (c) of section 63 is amended by
adding at the end the following new paragraph:
‘‘(7) SPECIAL RULES FOR TAXABLE YEARS 2018 THROUGH
2025.—In the case of a taxable year beginning after December
31, 2017, and before January 1, 2026—
‘‘(A) INCREASE IN STANDARD DEDUCTION.—Paragraph
(2) shall be applied—
‘‘(i) by substituting ‘$18,000’ for ‘$4,400’ in
subparagraph (B), and
‘‘(ii) by substituting ‘$12,000’ for ‘$3,000’ in
subparagraph (C).
‘‘(B) ADJUSTMENT FOR INFLATION.—
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131 STAT. 2073
‘‘(i) IN GENERAL.—Paragraph (4) shall not apply
to the dollar amounts contained in paragraphs (2)(B)
and (2)(C).
‘‘(ii) ADJUSTMENT OF INCREASED AMOUNTS.—In the
case of a taxable year beginning after 2018, the $18,000
and $12,000 amounts in subparagraph (A) shall each
be increased by an amount equal to—
‘‘(I) such dollar amount, multiplied by
‘‘(II) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting ‘2017’ for ‘2016’ in subparagraph (A)(ii)
thereof.
If any increase under this clause is not a multiple
of $50, such increase shall be rounded to the next
lowest multiple of $50.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 63 note.
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SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD TAX CREDIT.
(a) IN GENERAL.—Section 24 is amended by adding at the
end the following new subsection:
‘‘(h) SPECIAL RULES FOR TAXABLE YEARS 2018 THROUGH 2025.—
‘‘(1) IN GENERAL.—In the case of a taxable year beginning
after December 31, 2017, and before January 1, 2026, this
section shall be applied as provided in paragraphs (2) through
(7).
‘‘(2) CREDIT AMOUNT.—Subsection (a) shall be applied by
substituting ‘$2,000’ for ‘$1,000’.
‘‘(3) LIMITATION.—In lieu of the amount determined under
subsection (b)(2), the threshold amount shall be $400,000 in
the case of a joint return ($200,000 in any other case).
‘‘(4) PARTIAL CREDIT ALLOWED FOR CERTAIN OTHER DEPENDENTS.—
‘‘(A) IN GENERAL.—The credit determined under subsection (a) (after the application of paragraph (2)) shall
be increased by $500 for each dependent of the taxpayer
(as defined in section 152) other than a qualifying child
described in subsection (c).
‘‘(B) EXCEPTION FOR CERTAIN NONCITIZENS.—Subparagraph (A) shall not apply with respect to any individual
who would not be a dependent if subparagraph (A) of
section 152(b)(3) were applied without regard to all that
follows ‘resident of the United States’.
‘‘(C) CERTAIN QUALIFYING CHILDREN.—In the case of
any qualifying child with respect to whom a credit is not
allowed under this section by reason of paragraph (7),
such child shall be treated as a dependent to whom
subparagraph (A) applies.
‘‘(5) MAXIMUM AMOUNT OF REFUNDABLE CREDIT.—
‘‘(A) IN GENERAL.—The amount determined under subsection (d)(1)(A) with respect to any qualifying child shall
not exceed $1,400, and such subsection shall be applied
without regard to paragraph (4) of this subsection.
‘‘(B) ADJUSTMENT FOR INFLATION.—In the case of a
taxable year beginning after 2018, the $1,400 amount in
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26 USC 24.
PUBL097
131 STAT. 2074
26 USC 24 note.
PUBLIC LAW 115–97—DEC. 22, 2017
subparagraph (A) shall be increased by an amount equal
to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting
‘2017’ for ‘2016’ in subparagraph (A)(ii) thereof.
If any increase under this clause is not a multiple of
$100, such increase shall be rounded to the next lowest
multiple of $100.
‘‘(6) EARNED INCOME THRESHOLD FOR REFUNDABLE
CREDIT.—Subsection (d)(1)(B)(i) shall be applied by substituting
‘$2,500’ for ‘$3,000’.
‘‘(7) SOCIAL SECURITY NUMBER REQUIRED.—No credit shall
be allowed under this section to a taxpayer with respect to
any qualifying child unless the taxpayer includes the social
security number of such child on the return of tax for the
taxable year. For purposes of the preceding sentence, the term
‘social security number’ means a social security number issued
to an individual by the Social Security Administration, but
only if the social security number is issued—
‘‘(A) to a citizen of the United States or pursuant
to subclause (I) (or that portion of subclause (III) that
relates to subclause (I)) of section 205(c)(2)(B)(i) of the
Social Security Act, and
‘‘(B) before the due date for such return.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2017.
SEC. 11023. INCREASED LIMITATION FOR CERTAIN CHARITABLE CONTRIBUTIONS.
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26 USC 170.
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(a) IN GENERAL.—Section 170(b)(1) is amended by redesignating
subparagraph (G) as subparagraph (H) and by inserting after
subparagraph (F) the following new subparagraph:
‘‘(G) INCREASED LIMITATION FOR CASH CONTRIBUTIONS.—
‘‘(i) IN GENERAL.—In the case of any contribution
of cash to an organization described in subparagraph
(A), the total amount of such contributions which may
be taken into account under subsection (a) for any
taxable year beginning after December 31, 2017, and
before January 1, 2026, shall not exceed 60 percent
of the taxpayer’s contribution base for such year.
‘‘(ii) CARRYOVER.—If the aggregate amount of contributions described in clause (i) exceeds the applicable
limitation under clause (i) for any taxable year
described in such clause, such excess shall be treated
(in a manner consistent with the rules of subsection
(d)(1)) as a charitable contribution to which clause
(i) applies in each of the 5 succeeding years in order
of time.
‘‘(iii) COORDINATION WITH SUBPARAGRAPHS (A) AND
(B).—
‘‘(I) IN GENERAL.—Contributions taken into
account under this subparagraph shall not be
taken into account under subparagraph (A).
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2075
‘‘(II) LIMITATION REDUCTION.—For each taxable year described in clause (i), and each taxable
year to which any contribution under this subparagraph is carried over under clause (ii), subparagraph (A) shall be applied by reducing (but not
below zero) the contribution limitation allowed for
the taxable year under such subparagraph by the
aggregate contributions allowed under this
subparagraph for such taxable year, and subparagraph (B) shall be applied by treating any reference to subparagraph (A) as a reference to both
subparagraph (A) and this subparagraph.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to contributions in taxable years beginning after
December 31, 2017.
26 USC 170 note.
SEC. 11024. INCREASED CONTRIBUTIONS TO ABLE ACCOUNTS.
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(a) INCREASE IN LIMITATION FOR CONTRIBUTIONS FROM COMPENSATION OF INDIVIDUALS WITH DISABILITIES.—
(1) IN GENERAL.—Section 529A(b)(2)(B) is amended to read
26 USC 529A.
as follows:
‘‘(B) except in the case of contributions under subsection (c)(1)(C), if such contribution to an ABLE account
would result in aggregate contributions from all contributors to the ABLE account for the taxable year exceeding
the sum of—
‘‘(i) the amount in effect under section 2503(b)
for the calendar year in which the taxable year begins,
plus
‘‘(ii) in the case of any contribution by a designated
beneficiary described in paragraph (7) before January
1, 2026, the lesser of—
‘‘(I) compensation (as defined by section
219(f)(1)) includible in the designated beneficiary’s
gross income for the taxable year, or
‘‘(II) an amount equal to the poverty line for
a one-person household, as determined for the calendar year preceding the calendar year in which
the taxable year begins.’’.
(2) RESPONSIBILITY FOR CONTRIBUTION LIMITATION.—Paragraph (2) of section 529A(b) is amended by adding at the
end the following: ‘‘A designated beneficiary (or a person acting
on behalf of such beneficiary) shall maintain adequate records
for purposes of ensuring, and shall be responsible for ensuring,
that the requirements of subparagraph (B)(ii) are met.’’
(3) ELIGIBLE DESIGNATED BENEFICIARY.—Section 529A(b)
is amended by adding at the end the following:
‘‘(7) SPECIAL RULES RELATED TO CONTRIBUTION LIMIT.—For
purposes of paragraph (2)(B)(ii)—
‘‘(A) DESIGNATED BENEFICIARY.—A designated beneficiary described in this paragraph is an employee
(including an employee within the meaning of section
401(c)) with respect to whom—
‘‘(i) no contribution is made for the taxable year
to a defined contribution plan (within the meaning
of section 414(i)) with respect to which the requirements of section 401(a) or 403(a) are met,
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131 STAT. 2076
26 USC 25B.
26 USC 25B note.
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(ii) no contribution is made for the taxable year
to an annuity contract described in section 403(b), and
‘‘(iii) no contribution is made for the taxable year
to an eligible deferred compensation plan described
in section 457(b).
‘‘(B) POVERTY LINE.—The term ‘poverty line’ has the
meaning given such term by section 673 of the Community
Services Block Grant Act (42 U.S.C. 9902).’’.
(b) ALLOWANCE OF SAVER’S CREDIT FOR ABLE CONTRIBUTIONS
BY ACCOUNT HOLDER.—Section 25B(d)(1) is amended by striking
‘‘and’’ at the end of subparagraph (B)(ii), by striking the period
at the end of subparagraph (C) and inserting ‘‘, and’’, and by
inserting at the end the following:
‘‘(D) the amount of contributions made before January
1, 2026, by such individual to the ABLE account (within
the meaning of section 529A) of which such individual
is the designated beneficiary.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after the date of the enactment of this Act.
SEC. 11025. ROLLOVERS TO ABLE PROGRAMS FROM 529 PROGRAMS.
26 USC 529.
26 USC 529 note.
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26 USC 112 note.
(a) IN GENERAL.—Clause (i) of section 529(c)(3)(C) is amended
by striking ‘‘or’’ at the end of subclause (I), by striking the period
at the end of subclause (II) and inserting ‘‘, or’’, and by adding
at the end the following:
‘‘(III) before January 1, 2026, to an ABLE
account (as defined in section 529A(e)(6)) of the
designated beneficiary or a member of the family
of the designated beneficiary.
Subclause (III) shall not apply to so much of a distribution which, when added to all other contributions made
to the ABLE account for the taxable year, exceeds
the limitation under section 529A(b)(2)(B)(i).’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to distributions after the date of the enactment of
this Act.
SEC. 11026. TREATMENT OF CERTAIN INDIVIDUALS PERFORMING
SERVICES IN THE SINAI PENINSULA OF EGYPT.
(a) IN GENERAL.—For purposes of the following provisions of
the Internal Revenue Code of 1986, with respect to the applicable
period, a qualified hazardous duty area shall be treated in the
same manner as if it were a combat zone (as determined under
section 112 of such Code):
(1) Section 2(a)(3) (relating to special rule where deceased
spouse was in missing status).
(2) Section 112 (relating to the exclusion of certain combat
pay of members of the Armed Forces).
(3) Section 692 (relating to income taxes of members of
Armed Forces on death).
(4) Section 2201 (relating to members of the Armed Forces
dying in combat zone or by reason of combat-zone-incurred
wounds, etc.).
(5) Section 3401(a)(1) (defining wages relating to combat
pay for members of the Armed Forces).
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131 STAT. 2077
(6) Section 4253(d) (relating to the taxation of phone service
originating from a combat zone from members of the Armed
Forces).
(7) Section 6013(f)(1) (relating to joint return where individual is in missing status).
(8) Section 7508 (relating to time for performing certain
acts postponed by reason of service in combat zone).
(b) QUALIFIED HAZARDOUS DUTY AREA.—For purposes of this
section, the term ‘‘qualified hazardous duty area’’ means the Sinai
Peninsula of Egypt, if as of the date of the enactment of this
section any member of the Armed Forces of the United States
is entitled to special pay under section 310 of title 37, United
States Code (relating to special pay; duty subject to hostile fire
or imminent danger), for services performed in such location. Such
term includes such location only during the period such entitlement
is in effect.
(c) APPLICABLE PERIOD.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
applicable period is—
(A) the portion of the first taxable year ending after
June 9, 2015, which begins on such date, and
(B) any subsequent taxable year beginning before
January 1, 2026.
(2) WITHHOLDING.—In the case of subsection (a)(5), the
applicable period is—
(A) the portion of the first taxable year ending after
the date of the enactment of this Act which begins on
such date, and
(B) any subsequent taxable year beginning before
January 1, 2026.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
provisions of this section shall take effect on June 9, 2015.
(2) WITHHOLDING.—Subsection (a)(5) shall apply to remuneration paid after the date of the enactment of this Act.
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SEC. 11027. TEMPORARY REDUCTION IN MEDICAL EXPENSE DEDUCTION FLOOR.
(a) IN GENERAL.—Subsection (f) of section 213 is amended
to read as follows:
‘‘(f) SPECIAL RULES FOR 2013 THROUGH 2018.—In the case
of any taxable year—
‘‘(1) beginning after December 31, 2012, and ending before
January 1, 2017, in the case of a taxpayer if such taxpayer
or such taxpayer’s spouse has attained age 65 before the close
of such taxable year, and
‘‘(2) beginning after December 31, 2016, and ending before
January 1, 2019, in the case of any taxpayer,
subsection (a) shall be applied with respect to a taxpayer by substituting ‘7.5 percent’ for ‘10 percent’.’’.
(b) MINIMUM TAX PREFERENCE NOT TO APPLY.—Section
56(b)(1)(B) is amended by adding at the end the following new
sentence: ‘‘This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019’’.
(c) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2016.
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26 USC 213.
26 USC 56 note.
PUBL097
131 STAT. 2078
PUBLIC LAW 115–97—DEC. 22, 2017
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SEC. 11028. RELIEF FOR 2016 DISASTER AREAS.
(a) IN GENERAL.—For purposes of this section, the term ‘‘2016
disaster area’’ means any area with respect to which a major
disaster has been declared by the President under section 401
of the Robert T. Stafford Disaster Relief and Emergency Assistance
Act during calendar year 2016.
(b) SPECIAL RULES FOR USE OF RETIREMENT FUNDS WITH
RESPECT TO AREAS DAMAGED BY 2016 DISASTERS.—
(1) TAX-FAVORED WITHDRAWALS FROM RETIREMENT PLANS.—
(A) IN GENERAL.—Section 72(t) of the Internal Revenue
Code of 1986 shall not apply to any qualified 2016 disaster
distribution.
(B) AGGREGATE DOLLAR LIMITATION.—
(i) IN GENERAL.—For purposes of this subsection,
the aggregate amount of distributions received by an
individual which may be treated as qualified 2016
disaster distributions for any taxable year shall not
exceed the excess (if any) of—
(I) $100,000, over
(II) the aggregate amounts treated as qualified
2016 disaster distributions received by such individual for all prior taxable years.
(ii) TREATMENT OF PLAN DISTRIBUTIONS.—If a distribution to an individual would (without regard to
clause (i)) be a qualified 2016 disaster distribution,
a plan shall not be treated as violating any requirement
of this title merely because the plan treats such distribution as a qualified 2016 disaster distribution,
unless the aggregate amount of such distributions from
all plans maintained by the employer (and any member
of any controlled group which includes the employer)
to such individual exceeds $100,000.
(iii) CONTROLLED GROUP.—For purposes of clause
(ii), the term ‘‘controlled group’’ means any group
treated as a single employer under subsection (b), (c),
(m), or (o) of section 414 of the Internal Revenue Code
of 1986.
(C) AMOUNT DISTRIBUTED MAY BE REPAID.—
(i) IN GENERAL.—Any individual who receives a
qualified 2016 disaster distribution may, at any time
during the 3-year period beginning on the day after
the date on which such distribution was received, make
one or more contributions in an aggregate amount
not to exceed the amount of such distribution to an
eligible retirement plan of which such individual is
a beneficiary and to which a rollover contribution of
such distribution could be made under section 402(c),
403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16) of the
Internal Revenue Code of 1986, as the case may be.
(ii) TREATMENT OF REPAYMENTS OF DISTRIBUTIONS
FROM ELIGIBLE RETIREMENT PLANS OTHER THAN IRAS.—
For purposes of the Internal Revenue Code of 1986,
if a contribution is made pursuant to clause (i) with
respect to a qualified 2016 disaster distribution from
an eligible retirement plan other than an individual
retirement plan, then the taxpayer shall, to the extent
of the amount of the contribution, be treated as having
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2079
received the qualified 2016 disaster distribution in an
eligible rollover distribution (as defined in section
402(c)(4) of the Internal Revenue Code of 1986) and
as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within
60 days of the distribution.
(iii) TREATMENT OF REPAYMENTS FOR DISTRIBUTIONS FROM IRAS.—For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant
to clause (i) with respect to a qualified 2016 disaster
distribution from an individual retirement plan (as
defined by section 7701(a)(37) of the Internal Revenue
Code of 1986), then, to the extent of the amount of
the contribution, the qualified 2016 disaster distribution shall be treated as a distribution described in
section 408(d)(3) of such Code and as having been
transferred to the eligible retirement plan in a direct
trustee to trustee transfer within 60 days of the distribution.
(D) DEFINITIONS.—For purposes of this paragraph—
(i) QUALIFIED 2016 DISASTER DISTRIBUTION.—Except
as provided in subparagraph (B), the term ‘‘qualified
2016 disaster distribution’’ means any distribution
from an eligible retirement plan made on or after
January 1, 2016, and before January 1, 2018, to an
individual whose principal place of abode at any time
during calendar year 2016 was located in a disaster
area described in subsection (a) and who has sustained
an economic loss by reason of the events giving rise
to the Presidential declaration described in subsection
(a) which was applicable to such area.
(ii) ELIGIBLE RETIREMENT PLAN.—The term
‘‘eligible retirement plan’’ shall have the meaning given
such term by section 402(c)(8)(B) of the Internal Revenue Code of 1986.
(E) INCOME INCLUSION SPREAD OVER 3-YEAR PERIOD.—
(i) IN GENERAL.—In the case of any qualified 2016
disaster distribution, unless the taxpayer elects not
to have this subparagraph apply for any taxable year,
any amount required to be included in gross income
for such taxable year shall be so included ratably over
the 3-taxable-year period beginning with such taxable
year.
(ii) SPECIAL RULE.—For purposes of clause (i), rules
similar to the rules of subparagraph (E) of section
408A(d)(3) of the Internal Revenue Code of 1986 shall
apply.
(F) SPECIAL RULES.—
(i) EXEMPTION OF DISTRIBUTIONS FROM TRUSTEE
TO TRUSTEE TRANSFER AND WITHHOLDING RULES.—For
purposes of sections 401(a)(31), 402(f), and 3405 of
the Internal Revenue Code of 1986, qualified 2016
disaster distribution shall not be treated as eligible
rollover distributions.
(ii) QUALIFIED 2016 DISASTER DISTRIBUTIONS
TREATED AS MEETING PLAN DISTRIBUTION REQUIREMENTS.—For purposes of the Internal Revenue Code
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131 STAT. 2080
PUBLIC LAW 115–97—DEC. 22, 2017
of 1986, a qualified 2016 disaster distribution shall
be treated as meeting the requirements of sections
401(k)(2)(B)(i),
403(b)(7)(A)(ii),
403(b)(11),
and
457(d)(1)(A) of the Internal Revenue Code of 1986.
(2) PROVISIONS RELATING TO PLAN AMENDMENTS.—
(A) IN GENERAL.—If this paragraph applies to any
amendment to any plan or annuity contract, such plan
or contract shall be treated as being operated in accordance
with the terms of the plan during the period described
in subparagraph (B)(ii)(I).
(B) AMENDMENTS TO WHICH SUBSECTION APPLIES.—
(i) IN GENERAL.—This paragraph shall apply to
any amendment to any plan or annuity contract which
is made—
(I) pursuant to any provision of this section,
or pursuant to any regulation under any provision
of this section, and
(II) on or before the last day of the first plan
year beginning on or after January 1, 2018, or
such later date as the Secretary prescribes.
In the case of a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of 1986),
subclause (II) shall be applied by substituting the date
which is 2 years after the date otherwise applied under
subclause (II).
(ii) CONDITIONS.—This paragraph shall not apply
to any amendment to a plan or contract unless such
amendment applies retroactively for such period, and
shall not apply to any such amendment unless the
plan or contract is operated as if such amendment
were in effect during the period—
(I) beginning on the date that this section
or the regulation described in clause (i)(I) takes
effect (or in the case of a plan or contract amendment not required by this section or such regulation, the effective date specified by the plan), and
(II) ending on the date described in clause
(i)(II) (or, if earlier, the date the plan or contract
amendment is adopted).
(c) SPECIAL RULES FOR PERSONAL CASUALTY LOSSES RELATED
TO 2016 MAJOR DISASTER.—
(1) IN GENERAL.—If an individual has a net disaster loss
for any taxable year beginning after December 31, 2015, and
before January 1, 2018—
(A)
the
amount
determined
under
section
165(h)(2)(A)(ii) of the Internal Revenue Code of 1986 shall
be equal to the sum of—
(i) such net disaster loss, and
(ii) so much of the excess referred to in the matter
preceding clause (i) of section 165(h)(2)(A) of such Code
(reduced by the amount in clause (i) of this subparagraph) as exceeds 10 percent of the adjusted gross
income of the individual,
(B) section 165(h)(1) of such Code shall be applied
by substituting ‘‘$500’’ for ‘‘$500 ($100 for taxable years
beginning after December 31, 2009)’’,
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131 STAT. 2081
(C) the standard deduction determined under section
63(c) of such Code shall be increased by the net disaster
loss, and
(D) section 56(b)(1)(E) of such Code shall not apply
to so much of the standard deduction as is attributable
to the increase under subparagraph (C) of this paragraph.
(2) NET DISASTER LOSS.—For purposes of this subsection,
the term ‘‘net disaster loss’’ means the excess of qualified disaster-related personal casualty losses over personal casualty
gains (as defined in section 165(h)(3)(A) of the Internal Revenue
Code of 1986).
(3) QUALIFIED DISASTER-RELATED PERSONAL CASUALTY
LOSSES.—For purposes of this paragraph, the term ‘‘qualified
disaster-related personal casualty losses’’ means losses
described in section 165(c)(3) of the Internal Revenue Code
of 1986 which arise in a disaster area described in subsection
(a) on or after January 1, 2016, and which are attributable
to the events giving rise to the Presidential declaration
described in subsection (a) which was applicable to such area.
PART IV—EDUCATION
SEC.
11031.
TREATMENT OF STUDENT LOANS
ACCOUNT OF DEATH OR DISABILITY.
DISCHARGED
ON
(a) IN GENERAL.—Section 108(f) is amended by adding at the
end the following new paragraph:
‘‘(5) DISCHARGES ON ACCOUNT OF DEATH OR DISABILITY.—
‘‘(A) IN GENERAL.—In the case of an individual, gross
income does not include any amount which (but for this
subsection) would be includible in gross income for such
taxable year by reasons of the discharge (in whole or in
part) of any loan described in subparagraph (B) after
December 31, 2017, and before January 1, 2026, if such
discharge was—
‘‘(i) pursuant to subsection (a) or (d) of section
437 of the Higher Education Act of 1965 or the parallel
benefit under part D of title IV of such Act (relating
to the repayment of loan liability),
‘‘(ii) pursuant to section 464(c)(1)(F) of such Act,
or
‘‘(iii) otherwise discharged on account of the death
or total and permanent disability of the student.
‘‘(B) LOANS DESCRIBED.—A loan is described in this
subparagraph if such loan is—
‘‘(i) a student loan (as defined in paragraph (2)),
or
‘‘(ii) a private education loan (as defined in section
140(7) of the Consumer Credit Protection Act (15
U.S.C. 1650(7))).’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to discharges of indebtedness after December 31, 2017.
26 USC 108.
26 USC 108 note.
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SEC. 11032. 529 ACCOUNT FUNDING FOR ELEMENTARY AND SECONDARY EDUCATION.
(a) IN GENERAL.—
(1) IN GENERAL.—Section 529(c) is amended by adding at
the end the following new paragraph:
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PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(7) TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this subsection to the term ‘qualified
26 USC 529.
26 USC 529 note.
higher education expense’ shall include a reference to expenses
for tuition in connection with enrollment or attendance at an
elementary or secondary public, private, or religious school.’’.
(2) LIMITATION.—Section 529(e)(3)(A) is amended by adding
at the end the following: ‘‘The amount of cash distributions
from all qualified tuition programs described in subsection
(b)(1)(A)(ii) with respect to a beneficiary during any taxable
year shall, in the aggregate, include not more than $10,000
in expenses described in subsection (c)(7) incurred during the
taxable year.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to distributions made after December 31, 2017.
PART V—DEDUCTIONS AND EXCLUSIONS
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SEC. 11041. SUSPENSION OF DEDUCTION FOR PERSONAL EXEMPTIONS.
(a) IN GENERAL.—Subsection (d) of section 151 is amended—
(1) by striking ‘‘In the case of’’ in paragraph (4) and
inserting ‘‘Except as provided in paragraph (5), in the case
of’’, and
(2) by adding at the end the following new paragraph:
‘‘(5) SPECIAL RULES FOR TAXABLE YEARS 2018 THROUGH
2025.—In the case of a taxable year beginning after December
31, 2017, and before January 1, 2026—
‘‘(A) EXEMPTION AMOUNT.—The term ‘exemption
amount’ means zero.
‘‘(B) REFERENCES.—For purposes of any other provision
of this title, the reduction of the exemption amount to
zero under subparagraph (A) shall not be taken into
account in determining whether a deduction is allowed
or allowable, or whether a taxpayer is entitled to a deduction, under this section.’’.
(b) APPLICATION TO ESTATES AND TRUSTS.—Section 642(b)(2)(C)
is amended by adding at the end the following new clause:
‘‘(iii) YEARS WHEN PERSONAL EXEMPTION AMOUNT
IS ZERO.—
‘‘(I) IN GENERAL.—In the case of any taxable
year in which the exemption amount under section
151(d) is zero, clause (i) shall be applied by substituting ‘$4,150’ for ‘the exemption amount under
section 151(d)’.
‘‘(II) INFLATION ADJUSTMENT.—In the case of
any taxable year beginning in a calendar year
after 2018, the $4,150 amount in subparagraph
(A) shall be increased in the same manner as
provided in section 6334(d)(4)(C).’’.
(c) MODIFICATION OF WAGE WITHHOLDING RULES.—
(1) IN GENERAL.—Section 3402(a)(2) is amended by striking
‘‘means the amount’’ and all that follows and inserting ‘‘means
the amount by which the wages exceed the taxpayer’s withholding allowance, prorated to the payroll period.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 3401 is amended by striking subsection
(e).
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2083
(B) Paragraphs (1) and (2) of section 3402(f) are
amended to read as follows:
‘‘(1) IN GENERAL.—Under rules determined by the Secretary, an employee receiving wages shall on any day be entitled
to a withholding allowance determined based on—
‘‘(A) whether the employee is an individual for whom
a deduction is allowable with respect to another taxpayer
under section 151;
‘‘(B) if the employee is married, whether the employee’s
spouse is entitled to an allowance, or would be so entitled
if such spouse were an employee receiving wages, under
subparagraph (A) or (D), but only if such spouse does
not have in effect a withholding allowance certificate
claiming such allowance;
‘‘(C) the number of individuals with respect to whom,
on the basis of facts existing at the beginning of such
day, there may reasonably be expected to be allowable
a credit under section 24(a) for the taxable year under
subtitle A in respect of which amounts deducted and withheld under this chapter in the calendar year in which
such day falls are allowed as a credit;
‘‘(D) any additional amounts to which the employee
elects to take into account under subsection (m), but only
if the employee’s spouse does not have in effect a withholding allowance certificate making such an election;
‘‘(E) the standard deduction allowable to such employee
(one-half of such standard deduction in the case of an
employee who is married (as determined under section
7703) and whose spouse is an employee receiving wages
subject to withholding); and
‘‘(F) whether the employee has withholding allowance
certificates in effect with respect to more than 1 employer.
‘‘(2) ALLOWANCE CERTIFICATES.—
‘‘(A) ON COMMENCEMENT OF EMPLOYMENT.—On or
before the date of the commencement of employment with
an employer, the employee shall furnish the employer with
a signed withholding allowance certificate relating to the
withholding allowance claimed by the employee, which
shall in no event exceed the amount to which the employee
is entitled.
‘‘(B) CHANGE OF STATUS.—If, on any day during the
calendar year, an employee’s withholding allowance is in
excess of the withholding allowance to which the employee
would be entitled had the employee submitted a true and
accurate withholding allowance certificate to the employer
on that day, the employee shall within 10 days thereafter
furnish the employer with a new withholding allowance
certificate. If, on any day during the calendar year, an
employee’s withholding allowance is greater than the withholding allowance claimed, the employee may furnish the
employer with a new withholding allowance certificate
relating to the withholding allowance to which the
employee is so entitled, which shall in no event exceed
the amount to which the employee is entitled on such
day.
‘‘(C) CHANGE OF STATUS WHICH AFFECTS NEXT CALENDAR YEAR.—If on any day during the calendar year the
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PUBL097
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26 USC 3405.
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withholding allowance to which the employee will be, or
may reasonably be expected to be, entitled at the beginning
of the employee’s next taxable year under subtitle A is
different from the allowance to which the employee is entitled on such day, the employee shall, in such cases and
at such times as the Secretary shall by regulations prescribe, furnish the employer with a withholding allowance
certificate relating to the withholding allowance which the
employee claims with respect to such next taxable year,
which shall in no event exceed the withholding allowance
to which the employee will be, or may reasonably be
expected to be, so entitled.’’.
(C) Subsections (b)(1), (b)(2), (f)(3), (f)(4), (f)(5), (f)(7)
(including the heading thereof), (g)(4), (l)(1), (l)(2), and (n)
of section 3402 are each amended by striking ‘‘exemption’’
each place it appears and inserting ‘‘allowance’’.
(D) The heading of section 3402(f) is amended by
striking ‘‘EXEMPTIONS’’ and inserting ‘‘ALLOWANCE’’.
(E) Section 3402(m) is amended by striking ‘‘additional
withholding allowances or additional reductions in withholding under this subsection. In determining the number
of additional withholding allowances’’ and inserting ‘‘an
additional withholding allowance or additional reductions
in withholding under this subsection. In determining the
additional withholding allowance’’.
(F) Paragraphs (3) and (4) of section 3405(a) (and the
heading for such paragraph (4)) are each amended by
striking ‘‘exemption’’ each place it appears and inserting
‘‘allowance’’.
(G) Section 3405(a)(4) is amended by striking ‘‘shall
be determined’’ and all that follows through ‘‘3 withholding
exemptions’’ and inserting ‘‘shall be determined under rules
prescribed by the Secretary’’.
(d) EXCEPTION FOR DETERMINING PROPERTY EXEMPT FROM
LEVY.—Section 6334(d) is amended by adding at the end the following new paragraph:
‘‘(4) YEARS WHEN PERSONAL EXEMPTION AMOUNT IS ZERO.—
‘‘(A) IN GENERAL.—In the case of any taxable year
in which the exemption amount under section 151(d) is
zero, paragraph (2) shall not apply and for purposes of
paragraph (1) the term ‘exempt amount’ means an amount
equal to—
‘‘(i) the sum of the amount determined under
subparagraph (B) and the standard deduction, divided
by
‘‘(ii) 52.
‘‘(B) AMOUNT DETERMINED.—For purposes of subparagraph (A), the amount determined under this subparagraph
is $4,150 multiplied by the number of the taxpayer’s
dependents for the taxable year in which the levy occurs.
‘‘(C) INFLATION ADJUSTMENT.—In the case of any taxable year beginning in a calendar year after 2018, the
$4,150 amount in subparagraph (B) shall be increased by
an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
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131 STAT. 2085
the taxable year begins, determined by substituting
‘2017’ for ‘2016’ in subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence
is not a multiple of $100, such increase shall be rounded
to the next lowest multiple of $100.
‘‘(D) VERIFIED STATEMENT.—Unless the taxpayer submits to the Secretary a written and properly verified statement specifying the facts necessary to determine the proper
amount under subparagraph (A), subparagraph (A) shall
be applied as if the taxpayer were a married individual
filing a separate return with no dependents.’’.
(e) PERSONS REQUIRED TO MAKE RETURNS OF INCOME.—Section
6012 is amended by adding at the end the following new subsection:
‘‘(f) SPECIAL RULE FOR TAXABLE YEARS 2018 THROUGH 2025.—
In the case of a taxable year beginning after December 31, 2017,
and before January 1, 2026, subsection (a)(1) shall not apply, and
every individual who has gross income for the taxable year shall
be required to make returns with respect to income taxes under
subtitle A, except that a return shall not be required of—
‘‘(1) an individual who is not married (determined by
applying section 7703) and who has gross income for the taxable
year which does not exceed the standard deduction applicable
to such individual for such taxable year under section 63,
or
‘‘(2) an individual entitled to make a joint return if—
‘‘(A) the gross income of such individual, when combined with the gross income of such individual’s spouse,
for the taxable year does not exceed the standard deduction
which would be applicable to the taxpayer for such taxable
year under section 63 if such individual and such individual’s spouse made a joint return,
‘‘(B) such individual and such individual’s spouse have
the same household as their home at the close of the
taxable year,
‘‘(C) such individual’s spouse does not make a separate
return, and
‘‘(D) neither such individual nor such individual’s
spouse is an individual described in section 63(c)(5) who
has income (other than earned income) in excess of the
amount in effect under section 63(c)(5)(A).’’.
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2017.
(2) WAGE WITHHOLDING.—The Secretary of the Treasury
may administer section 3402 for taxable years beginning before
January 1, 2019, without regard to the amendments made
by subsections (a) and (c).
26 USC 6012.
26 USC 151 note.
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SEC. 11042. LIMITATION ON DEDUCTION FOR STATE AND LOCAL, ETC.
TAXES.
(a) IN GENERAL.—Subsection (b) of section 164 is amended
by adding at the end the following new paragraph:
‘‘(6) LIMITATION ON INDIVIDUAL DEDUCTIONS FOR TAXABLE
YEARS 2018 THROUGH 2025.—In the case of an individual and
a taxable year beginning after December 31, 2017, and before
January 1, 2026—
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26 USC 164 note.
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(A) foreign real property taxes shall not be taken
into account under subsection (a)(1), and
‘‘(B) the aggregate amount of taxes taken into account
under paragraphs (1), (2), and (3) of subsection (a) and
paragraph (5) of this subsection for any taxable year shall
not exceed $10,000 ($5,000 in the case of a married individual filing a separate return).
The preceding sentence shall not apply to any foreign taxes
described in subsection (a)(3) or to any taxes described in
paragraph (1) and (2) of subsection (a) which are paid or accrued
in carrying on a trade or business or an activity described
in section 212. For purposes of subparagraph (B), an amount
paid in a taxable year beginning before January 1, 2018, with
respect to a State or local income tax imposed for a taxable
year beginning after December 31, 2017, shall be treated as
paid on the last day of the taxable year for which such tax
is so imposed.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2016.
SEC. 11043. LIMITATION ON DEDUCTION FOR QUALIFIED RESIDENCE
INTEREST.
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26 USC 163.
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(a) IN GENERAL.—Section 163(h)(3) is amended by adding at
the end the following new subparagraph:
‘‘(F) SPECIAL RULES FOR TAXABLE YEARS 2018 THROUGH
2025.—
‘‘(i) IN GENERAL.—In the case of taxable years
beginning after December 31, 2017, and before January
1, 2026—
‘‘(I) DISALLOWANCE OF HOME EQUITY INDEBTEDNESS INTEREST.—Subparagraph (A)(ii) shall not
apply.
‘‘(II) LIMITATION ON ACQUISITION INDEBTEDNESS.—Subparagraph (B)(ii) shall be applied by
substituting ‘$750,000 ($375,000’ for ‘$1,000,000
($500,000’.
‘‘(III) TREATMENT OF INDEBTEDNESS INCURRED
ON OR BEFORE DECEMBER 15, 2017.—Subclause (II)
shall not apply to any indebtedness incurred on
or before December 15, 2017, and, in applying
such subclause to any indebtedness incurred after
such date, the limitation under such subclause
shall be reduced (but not below zero) by the
amount of any indebtedness incurred on or before
December 15, 2017, which is treated as acquisition
indebtedness for purposes of this subsection for
the taxable year.
‘‘(IV) BINDING CONTRACT EXCEPTION.—In the
case of a taxpayer who enters into a written
binding contract before December 15, 2017, to close
on the purchase of a principal residence before
January 1, 2018, and who purchases such residence before April 1, 2018, subclause (III) shall
be applied by substituting ‘April 1, 2018’ for
‘December 15, 2017’.
‘‘(ii) TREATMENT OF LIMITATION IN TAXABLE YEARS
AFTER DECEMBER 31, 2025.—In the case of taxable years
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beginning after December 31, 2025, the limitation
under subparagraph (B)(ii) shall be applied to the
aggregate amount of indebtedness of the taxpayer
described in subparagraph (B)(i) without regard to the
taxable year in which the indebtedness was incurred.
‘‘(iii) TREATMENT OF REFINANCINGS OF INDEBTEDNESS.—
‘‘(I) IN GENERAL.—In the case of any indebtedness which is incurred to refinance indebtedness,
such refinanced indebtedness shall be treated for
purposes of clause (i)(III) as incurred on the date
that the original indebtedness was incurred to the
extent the amount of the indebtedness resulting
from such refinancing does not exceed the amount
of the refinanced indebtedness.
‘‘(II) LIMITATION ON PERIOD OF REFINANCING.—
Subclause (I) shall not apply to any indebtedness
after the expiration of the term of the original
indebtedness or, if the principal of such original
indebtedness is not amortized over its term, the
expiration of the term of the 1st refinancing of
such indebtedness (or if earlier, the date which
is 30 years after the date of such 1st refinancing).
‘‘(iv) COORDINATION WITH EXCLUSION OF INCOME
FROM DISCHARGE OF INDEBTEDNESS.—Section 108(h)(2)
shall be applied without regard to this subparagraph.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 163 note.
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SEC. 11044. MODIFICATION OF DEDUCTION FOR PERSONAL CASUALTY
LOSSES.
(a) IN GENERAL.—Subsection (h) of section 165 is amended
by adding at the end the following new paragraph:
‘‘(5) LIMITATION FOR TAXABLE YEARS 2018 THROUGH 2025.—
‘‘(A) IN GENERAL.—In the case of an individual, except
as provided in subparagraph (B), any personal casualty
loss which (but for this paragraph) would be deductible
in a taxable year beginning after December 31, 2017, and
before January 1, 2026, shall be allowed as a deduction
under subsection (a) only to the extent it is attributable
to a Federally declared disaster (as defined in subsection
(i)(5)).
‘‘(B) EXCEPTION RELATED TO PERSONAL CASUALTY
GAINS.—If a taxpayer has personal casualty gains for any
taxable year to which subparagraph (A) applies—
‘‘(i) subparagraph (A) shall not apply to the portion
of the personal casualty loss not attributable to a Federally declared disaster (as so defined) to the extent
such loss does not exceed such gains, and
‘‘(ii) in applying paragraph (2) for purposes of
subparagraph (A) to the portion of personal casualty
loss which is so attributable to such a disaster, the
amount of personal casualty gains taken into account
under paragraph (2)(A) shall be reduced by the portion
of such gains taken into account under clause (i).’’.
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26 USC 165 note.
PUBLIC LAW 115–97—DEC. 22, 2017
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to losses incurred in taxable years beginning after
December 31, 2017.
SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED DEDUCTIONS.
26 USC 67.
26 USC 67 note.
(a) IN GENERAL.—Section 67 is amended by adding at the
end the following new subsection:
‘‘(g) SUSPENSION FOR TAXABLE YEARS 2018 THROUGH 2025.—
Notwithstanding subsection (a), no miscellaneous itemized deduction shall be allowed for any taxable year beginning after December
31, 2017, and before January 1, 2026.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2017.
SEC. 11046. SUSPENSION OF OVERALL LIMITATION ON ITEMIZED
DEDUCTIONS.
26 USC 68 note.
(a) IN GENERAL.—Section 68 is amended by adding at the
end the following new subsection:
‘‘(f) SECTION NOT TO APPLY.—This section shall not apply to
any taxable year beginning after December 31, 2017, and before
January 1, 2026.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
SEC. 11047. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE
COMMUTING REIMBURSEMENT.
26 USC 132 note.
(a) IN GENERAL.—Section 132(f) is amended by adding at the
end the following new paragraph:
‘‘(8) SUSPENSION OF QUALIFIED BICYCLE COMMUTING
REIMBURSEMENT EXCLUSION.—Paragraph (1)(D) shall not apply
to any taxable year beginning after December 31, 2017, and
before January 1, 2026.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2017.
SEC. 11048. SUSPENSION OF EXCLUSION FOR QUALIFIED MOVING
EXPENSE REIMBURSEMENT.
26 USC 132 note.
(a) IN GENERAL.—Section 132(g) is amended—
(1) by striking ‘‘For purposes of this section, the term’’
and inserting ‘‘For purposes of this section—
‘‘(1) IN GENERAL.—The term’’, and
(2) by adding at the end the following new paragraph:
‘‘(2) SUSPENSION FOR TAXABLE YEARS 2018 THROUGH 2025.—
Except in the case of a member of the Armed Forces of the
United States on active duty who moves pursuant to a military
order and incident to a permanent change of station, subsection
(a)(6) shall not apply to any taxable year beginning after
December 31, 2017, and before January 1, 2026.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
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SEC. 11049. SUSPENSION OF DEDUCTION FOR MOVING EXPENSES.
(a) IN GENERAL.—Section 217 is amended by adding at the
end the following new subsection:
‘‘(k) SUSPENSION OF DEDUCTION FOR TAXABLE YEARS 2018
THROUGH 2025.—Except in the case of an individual to whom
subsection (g) applies, this section shall not apply to any taxable
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year beginning after December 31, 2017, and before January 1,
2026.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 217 note.
SEC. 11050. LIMITATION ON WAGERING LOSSES.
(a) IN GENERAL.—Section 165(d) is amended by adding at the
end the following: ‘‘For purposes of the preceding sentence, in
the case of taxable years beginning after December 31, 2017, and
before January 1, 2026, the term ‘losses from wagering transactions’
includes any deduction otherwise allowable under this chapter
incurred in carrying on any wagering transaction.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 165.
26 USC 165 note.
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SEC. 11051. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS.
(a) IN GENERAL.—Part VII of subchapter B is amended by
striking section 215 (and by striking the item relating to such
section in the table of sections for such subpart).
(b) CONFORMING AMENDMENTS.—
(1) CORRESPONDING REPEAL OF PROVISIONS PROVIDING FOR
INCLUSION OF ALIMONY IN GROSS INCOME.—
(A) Subsection (a) of section 61 is amended by striking
paragraph (8) and by redesignating paragraphs (9) through
(15) as paragraphs (8) through (14), respectively.
(B) Part II of subchapter B of chapter 1 is amended
by striking section 71 (and by striking the item relating
to such section in the table of sections for such part).
(C) Subpart F of part I of subchapter J of chapter
1 is amended by striking section 682 (and by striking
the item relating to such section in the table of sections
for such subpart).
(2) RELATED TO REPEAL OF SECTION 215.—
(A) Section 62(a) is amended by striking paragraph
(10).
(B) Section 3402(m)(1) is amended by striking ‘‘(other
than paragraph (10) thereof)’’.
(C) Section 6724(d)(3) is amended by striking subparagraph (C) and by redesignating subparagraph (D) as
subparagraph (C).
(3) RELATED TO REPEAL OF SECTION 71.—
(A) Section 121(d)(3) is amended—
(i) by striking ‘‘(as defined in section 71(b)(2))’’
in subparagraph (B), and
(ii) by adding at the end the following new
subparagraph:
‘‘(C) DIVORCE OR SEPARATION INSTRUMENT.—For purposes of this paragraph, the term ‘divorce or separation
instrument’ means—
‘‘(i) a decree of divorce or separate maintenance
or a written instrument incident to such a decree,
‘‘(ii) a written separation agreement, or
‘‘(iii) a decree (not described in clause (i)) requiring
a spouse to make payments for the support or maintenance of the other spouse.’’.
(B) Section 152(d)(5) is amended to read as follows:
‘‘(5) SPECIAL RULES FOR SUPPORT.—
‘‘(A) IN GENERAL.—For purposes of this subsection—
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26 USC 211 prec.
26 USC 71 prec.
26 USC 681 prec.
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26 USC 219.
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26 USC 61 note.
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‘‘(i) payments to a spouse of alimony or separate
maintenance payments shall not be treated as a payment by the payor spouse for the support of any
dependent, and
‘‘(ii) in the case of the remarriage of a parent,
support of a child received from the parent’s spouse
shall be treated as received from the parent.
‘‘(B) ALIMONY OR SEPARATE MAINTENANCE PAYMENT.—
For purposes of subparagraph (A), the term ‘alimony or
separate maintenance payment’ means any payment in
cash if—
‘‘(i) such payment is received by (or on behalf of)
a spouse under a divorce or separation instrument
(as defined in section 121(d)(3)(C)),
‘‘(ii) in the case of an individual legally separated
from the individual’s spouse under a decree of divorce
or of separate maintenance, the payee spouse and the
payor spouse are not members of the same household
at the time such payment is made, and
‘‘(iii) there is no liability to make any such payment
for any period after the death of the payee spouse
and there is no liability to make any payment (in
cash or property) as a substitute for such payments
after the death of the payee spouse.’’.
(C) Section 219(f)(1) is amended by striking the third
sentence.
(D) Section 220(f)(7) is amended by striking ‘‘subparagraph (A) of section 71(b)(2)’’ and inserting ‘‘clause (i) of
section 121(d)(3)(C)’’.
(E) Section 223(f)(7) is amended by striking ‘‘subparagraph (A) of section 71(b)(2)’’ and inserting ‘‘clause (i) of
section 121(d)(3)(C)’’.
(F) Section 382(l)(3)(B)(iii) is amended by striking ‘‘section 71(b)(2)’’ and inserting ‘‘section 121(d)(3)(C)’’.
(G) Section 408(d)(6) is amended by striking ‘‘subparagraph (A) of section 71(b)(2)’’ and inserting ‘‘clause (i) of
section 121(d)(3)(C)’’.
(4) ADDITIONAL CONFORMING AMENDMENTS.—Section
7701(a)(17) is amended—
(A) by striking ‘‘sections 682 and 2516’’ and inserting
‘‘section 2516’’, and
(B) by striking ‘‘such sections’’ each place it appears
and inserting ‘‘such section’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to—
(1) any divorce or separation instrument (as defined in
section 71(b)(2) of the Internal Revenue Code of 1986 as in
effect before the date of the enactment of this Act) executed
after December 31, 2018, and
(2) any divorce or separation instrument (as so defined)
executed on or before such date and modified after such date
if the modification expressly provides that the amendments
made by this section apply to such modification.
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131 STAT. 2091
PART VI—INCREASE IN ESTATE AND GIFT TAX
EXEMPTION
SEC. 11061. INCREASE IN ESTATE AND GIFT TAX EXEMPTION.
(a) IN GENERAL.—Section 2010(c)(3) is amended by adding at
the end the following new subparagraph:
‘‘(C) INCREASE IN BASIC EXCLUSION AMOUNT.—In the
case of estates of decedents dying or gifts made after
December 31, 2017, and before January 1, 2026, subparagraph (A) shall be applied by substituting ‘$10,000,000’
for ‘$5,000,000’.’’.
(b) CONFORMING AMENDMENT.—Subsection (g) of section 2001
is amended to read as follows:
‘‘(g) MODIFICATIONS TO TAX PAYABLE.—
‘‘(1) MODIFICATIONS TO GIFT TAX PAYABLE TO REFLECT DIFFERENT TAX RATES.—For purposes of applying subsection (b)(2)
with respect to 1 or more gifts, the rates of tax under subsection
(c) in effect at the decedent’s death shall, in lieu of the rates
of tax in effect at the time of such gifts, be used both to
compute—
‘‘(A) the tax imposed by chapter 12 with respect to
such gifts, and
‘‘(B) the credit allowed against such tax under section
2505, including in computing—
‘‘(i) the applicable credit amount under section
2505(a)(1), and
‘‘(ii) the sum of the amounts allowed as a credit
for all preceding periods under section 2505(a)(2).
‘‘(2) MODIFICATIONS TO ESTATE TAX PAYABLE TO REFLECT
DIFFERENT BASIC EXCLUSION AMOUNTS.—The Secretary shall
prescribe such regulations as may be necessary or appropriate
to carry out this section with respect to any difference
between—
‘‘(A) the basic exclusion amount under section
2010(c)(3) applicable at the time of the decedent’s death,
and
‘‘(B) the basic exclusion amount under such section
applicable with respect to any gifts made by the decedent.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to estates of decedents dying and gifts made after
December 31, 2017.
26 USC 2010.
26 USC 2001
note.
PART VII—EXTENSION OF TIME LIMIT FOR
CONTESTING IRS LEVY
SEC. 11071. EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY.
(a) EXTENSION OF TIME FOR RETURN OF PROPERTY SUBJECT
LEVY.—Subsection (b) of section 6343 is amended by striking
‘‘9 months’’ and inserting ‘‘2 years’’.
(b) PERIOD OF LIMITATION ON SUITS.—Subsection (c) of section
6532 is amended—
(1) by striking ‘‘9 months’’ in paragraph (1) and inserting
‘‘2 years’’, and
(2) by striking ‘‘9-month’’ in paragraph (2) and inserting
‘‘2-year’’.
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PUBLIC LAW 115–97—DEC. 22, 2017
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to—
(1) levies made after the date of the enactment of this
Act, and
(2) levies made on or before such date if the 9-month
period has not expired under section 6343(b) of the Internal
Revenue Code of 1986 (without regard to this section) as of
such date.
26 USC 6343
note.
PART VIII—INDIVIDUAL MANDATE
SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR
INDIVIDUALS FAILING TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.
26 USC 5000A.
26 USC 5000A
note.
(a) IN GENERAL.—Section 5000A(c) is amended—
(1) in paragraph (2)(B)(iii), by striking ‘‘2.5 percent’’ and
inserting ‘‘Zero percent’’, and
(2) in paragraph (3)—
(A) by striking ‘‘$695’’ in subparagraph (A) and
inserting ‘‘$0’’, and
(B) by striking subparagraph (D).
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to months beginning after December 31, 2018.
Subtitle B—Alternative Minimum Tax
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SEC. 12001. REPEAL OF TAX FOR CORPORATIONS.
(a) IN GENERAL.—Section 55(a) is amended by striking ‘‘There’’
and inserting ‘‘In the case of a taxpayer other than a corporation,
there’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 38(c)(6) is amended by adding at the end the
following new subparagraph:
‘‘(E) CORPORATIONS.—In the case of a corporation, this
subsection shall be applied by treating the corporation
as having a tentative minimum tax of zero.’’.
(2) Section 53(d)(2) is amended by inserting ‘‘, except that
in the case of a corporation, the tentative minimum tax shall
be treated as zero’’ before the period at the end.
(3)(A) Section 55(b)(1) is amended to read as follows:
‘‘(1) AMOUNT OF TENTATIVE TAX.—
‘‘(A) IN GENERAL.—The tentative minimum tax for the
taxable year is the sum of—
‘‘(i) 26 percent of so much of the taxable excess
as does not exceed $175,000, plus
‘‘(ii) 28 percent of so much of the taxable excess
as exceeds $175,000.
The amount determined under the preceding sentence shall
be reduced by the alternative minimum tax foreign tax
credit for the taxable year.
‘‘(B) TAXABLE EXCESS.—For purposes of this subsection,
the term ‘taxable excess’ means so much of the alternative
minimum taxable income for the taxable year as exceeds
the exemption amount.
‘‘(C) MARRIED INDIVIDUAL FILING SEPARATE RETURN.—
In the case of a married individual filing a separate return,
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131 STAT. 2093
subparagraph (A) shall be applied by substituting 50 percent of the dollar amount otherwise applicable under clause
(i) and clause (ii) thereof. For purposes of the preceding
sentence, marital status shall be determined under section
7703.’’.
(B) Section 55(b)(3) is amended by striking ‘‘paragraph
(1)(A)(i)’’ and inserting ‘‘paragraph (1)(A)’’.
(C) Section 59(a) is amended—
(i) by striking ‘‘subparagraph (A)(i) or (B)(i) of section
55(b)(1) (whichever applies) in lieu of the highest rate
of tax specified in section 1 or 11 (whichever applies)’’
in paragraph (1)(C) and inserting ‘‘section 55(b)(1) in lieu
of the highest rate of tax specified in section 1’’, and
(ii) in paragraph (2), by striking ‘‘means’’ and all that
follows and inserting ‘‘means the amount determined under
the first sentence of section 55(b)(1)(A).’’.
(D) Section 897(a)(2)(A) is amended by striking ‘‘section
55(b)(1)(A)’’ and inserting ‘‘section 55(b)(1)’’.
(E) Section 911(f) is amended—
(i) in paragraph (1)(B)—
(I) by striking ‘‘section 55(b)(1)(A)(ii)’’ and inserting
‘‘section 55(b)(1)(B)’’, and
(II) by striking ‘‘section 55(b)(1)(A)(i)’’ and inserting
‘‘section 55(b)(1)(A)’’, and
(ii) in paragraph (2)(B), by striking ‘‘section
55(b)(1)(A)(ii)’’ each place it appears and inserting ‘‘section
55(b)(1)(B)’’.
(4) Section 55(c)(1) is amended by striking ‘‘, the section
936 credit allowable under section 27(b), and the Puerto Rico
economic activity credit under section 30A’’.
(5) Section 55(d), as amended by section 11002, is
amended—
(A) by striking paragraph (2) and redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively,
(B) in paragraph (2) (as so redesignated), by inserting
‘‘and’’ at the end of subparagraph (B), by striking ‘‘, and’’
at the end of subparagraph (C) and inserting a period,
and by striking subparagraph (D), and
(C) in paragraph (3) (as so redesignated)—
(i) by striking ‘‘(b)(1)(A)(i)’’ in subparagraph (B)(i)
and inserting ‘‘(b)(1)(A)’’, and
(ii) by striking ‘‘paragraph (3)’’ in subparagraph
(B)(iii) and inserting ‘‘paragraph (2)’’.
(6) Section 55 is amended by striking subsection (e).
(7) Section 56(b)(2) is amended by striking subparagraph
(C) and by redesignating subparagraph (D) as subparagraph
(C).
(8)(A) Section 56 is amended by striking subsections (c)
and (g).
(B) Section 847 is amended by striking the last sentence
of paragraph (9).
(C) Section 848 is amended by striking subsection (i).
(9) Section 58(a) is amended by striking paragraph (3)
and redesignating paragraph (4) as paragraph (3).
(10) Section 59 is amended by striking subsections (b)
and (f).
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26 USC 55.
PUBL097
131 STAT. 2094
26 USC 11.
26 USC 11 note.
PUBLIC LAW 115–97—DEC. 22, 2017
(11) Section 11(d) is amended by striking ‘‘the taxes
imposed by subsection (a) and section 55’’ and inserting ‘‘the
tax imposed by subsection (a)’’.
(12) Section 12 is amended by striking paragraph (7).
(13) Section 168(k) is amended by striking paragraph (4).
(14) Section 882(a)(1) is amended by striking ‘‘, 55,’’.
(15) Section 962(a)(1) is amended by striking ‘‘sections 11
and 55’’ and inserting ‘‘section 11’’.
(16) Section 1561(a) is amended—
(A) by inserting ‘‘and’’ at the end of paragraph (1),
by striking ‘‘, and’’ at the end of paragraph (2) and inserting
a period, and by striking paragraph (3), and
(B) by striking the last sentence.
(17) Section 6425(c)(1)(A) is amended to read as follows:
‘‘(A) the tax imposed by section 11 or 1201(a), or subchapter L of chapter 1, whichever is applicable, over’’.
(18) Section 6655(e)(2) is amended by striking ‘‘and alternative minimum taxable income’’ each place it appears in subparagraphs (A) and (B)(i).
(19) Section 6655(g)(1)(A) is amended by inserting ‘‘plus’’
at the end of clause (i), by striking clause (ii), and by redesignating clause (iii) as clause (ii).
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
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SEC. 12002. CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY OF
CORPORATIONS.
(a) CREDITS TREATED AS REFUNDABLE.—Section 53 is amended
by adding at the end the following new subsection:
‘‘(e) PORTION OF CREDIT TREATED AS REFUNDABLE.—
‘‘(1) IN GENERAL.—In the case of any taxable year of a
corporation beginning in 2018, 2019, 2020, or 2021, the limitation under subsection (c) shall be increased by the AMT refundable credit amount for such year.
‘‘(2) AMT REFUNDABLE CREDIT AMOUNT.—For purposes of
paragraph (1), the AMT refundable credit amount is an amount
equal to 50 percent (100 percent in the case of a taxable
year beginning in 2021) of the excess (if any) of—
‘‘(A) the minimum tax credit determined under subsection (b) for the taxable year, over
‘‘(B) the minimum tax credit allowed under subsection
(a) for such year (before the application of this subsection
for such year).
‘‘(3) CREDIT REFUNDABLE.—For purposes of this title (other
than this section), the credit allowed by reason of this subsection shall be treated as a credit allowed under subpart
C (and not this subpart).
‘‘(4) SHORT TAXABLE YEARS.—In the case of any taxable
year of less than 365 days, the AMT refundable credit amount
determined under paragraph (2) with respect to such taxable
year shall be the amount which bears the same ratio to such
amount determined without regard to this paragraph as the
number of days in such taxable year bears to 365.’’.
(b) TREATMENT OF REFERENCES.—Section 53(d) is amended by
adding at the end the following new paragraph:
‘‘(3) AMT TERM REFERENCES.—In the case of a corporation,
any references in this subsection to section 55, 56, or 57 shall
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131 STAT. 2095
be treated as a reference to such section as in effect before
the amendments made by Tax Cuts and Jobs Act.’’.
(c) CONFORMING AMENDMENT.—Section 1374(b)(3)(B) is
amended by striking the last sentence thereof.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
(2) CONFORMING AMENDMENT.—The amendment made by
subsection (c) shall apply to taxable years beginning after
December 31, 2021.
26 USC 1374.
26 USC 53 note.
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SEC. 12003. INCREASED EXEMPTION FOR INDIVIDUALS.
(a) IN GENERAL.—Section 55(d), as amended by the preceding
provisions of this Act, is amended by adding at the end the following
new paragraph:
‘‘(4) SPECIAL RULE FOR TAXABLE YEARS BEGINNING AFTER
2017 AND BEFORE 2026.—
‘‘(A) IN GENERAL.—In the case of any taxable year
beginning after December 31, 2017, and before January
1, 2026—
‘‘(i) paragraph (1) shall be applied—
‘‘(I) by substituting ‘$109,400’ for ‘$78,750’ in
subparagraph (A), and
‘‘(II) by substituting ‘$70,300’ for ‘$50,600’ in
subparagraph (B), and
‘‘(ii) paragraph (2) shall be applied—
‘‘(I) by substituting ‘$1,000,000’ for ‘$150,000’
in subparagraph (A),
‘‘(II) by substituting ‘50 percent of the dollar
amount applicable under subparagraph (A)’ for
‘$112,500’ in subparagraph (B), and
‘‘(III) in the case of a taxpayer described in
paragraph (1)(D), without regard to the substitution under subclause (I).
‘‘(B) INFLATION ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of any taxable year
beginning in a calendar year after 2018, the amounts
described in clause (ii) shall each be increased by an
amount equal to—
‘‘(I) such dollar amount, multiplied by
‘‘(II) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting ‘calendar year 2017’ for ‘calendar year
2016’ in subparagraph (A)(ii) thereof.
‘‘(ii) AMOUNTS DESCRIBED.—The amounts described
in this clause are the $109,400 amount in subparagraph (A)(i)(I), the $70,300 amount in subparagraph
(A)(i)(II), and the $1,000,000 amount in subparagraph
(A)(ii)(I).
‘‘(iii) ROUNDING.—Any increased amount determined under clause (i) shall be rounded to the nearest
multiple of $100.
‘‘(iv) COORDINATION WITH CURRENT ADJUSTMENTS.—In the case of any taxable year to which
subparagraph (A) applies, no adjustment shall be made
under paragraph (3) to any of the numbers which
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131 STAT. 2096
26 USC 55 note.
PUBLIC LAW 115–97—DEC. 22, 2017
are substituted under subparagraph (A) and adjusted
under this subparagraph.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
Subtitle C—Business-related Provisions
PART I—CORPORATE PROVISIONS
SEC. 13001. 21-PERCENT CORPORATE TAX RATE.
26 USC 11.
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26 USC 1201
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(a) IN GENERAL.—Subsection (b) of section 11 is amended to
read as follows:
‘‘(b) AMOUNT OF TAX.—The amount of the tax imposed by
subsection (a) shall be 21 percent of taxable income.’’.
(b) CONFORMING AMENDMENTS.—
(1) The following sections are each amended by striking
‘‘section 11(b)(1)’’ and inserting ‘‘section 11(b)’’:
(A) Section 280C(c)(3)(B)(ii)(II).
(B) Paragraphs (2)(B) and (6)(A)(ii) of section 860E(e).
(C) Section 7874(e)(1)(B).
(2)(A) Part I of subchapter P of chapter 1 is amended
by striking section 1201 (and by striking the item relating
to such section in the table of sections for such part).
(B) Section 12 is amended by striking paragraphs (4) and
(6), and by redesignating paragraph (5) as paragraph (4).
(C) Section 453A(c)(3) is amended by striking ‘‘or 1201
(whichever is appropriate)’’.
(D) Section 527(b) is amended—
(i) by striking paragraph (2), and
(ii) by striking all that precedes ‘‘is hereby imposed’’
and inserting:
‘‘(b) TAX IMPOSED.—A tax’’.
(E) Sections 594(a) is amended by striking ‘‘taxes imposed
by section 11 or 1201(a)’’ and inserting ‘‘tax imposed by section
11’’.
(F) Section 691(c)(4) is amended by striking ‘‘1201,’’.
(G) Section 801(a) is amended—
(i) by striking paragraph (2), and
(ii) by striking all that precedes ‘‘is hereby imposed’’
and inserting:
‘‘(a) TAX IMPOSED.—A tax’’.
(H) Section 831(e) is amended by striking paragraph (1)
and by redesignating paragraphs (2) and (3) as paragraphs
(1) and (2), respectively.
(I) Sections 832(c)(5) and 834(b)(1)(D) are each amended
by striking ‘‘sec. 1201 and following,’’.
(J) Section 852(b)(3)(A) is amended by striking ‘‘section
1201(a)’’ and inserting ‘‘section 11(b)’’.
(K) Section 857(b)(3) is amended—
(i) by striking subparagraph (A) and redesignating subparagraphs (B) through (F) as subparagraphs (A) through
(E), respectively,
(ii) in subparagraph (C), as so redesignated—
(I) by striking ‘‘subparagraph (A)(ii)’’ in clause (i)
thereof and inserting ‘‘paragraph (1)’’,
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2097
(II) by striking ‘‘the tax imposed by subparagraph
(A)(ii)’’ in clauses (ii) and (iv) thereof and inserting
‘‘the tax imposed by paragraph (1) on undistributed
capital gain’’,
(iii) in subparagraph (E), as so redesignated, by
striking ‘‘subparagraph (B) or (D)’’ and inserting ‘‘subparagraph (A) or (C)’’, and
(iv) by adding at the end the following new subparagraph:
‘‘(F) UNDISTRIBUTED CAPITAL GAIN.—For purposes of
this paragraph, the term ‘undistributed capital gain’ means
the excess of the net capital gain over the deduction for
dividends paid (as defined in section 561) determined with
reference to capital gain dividends only.’’.
(L) Section 882(a)(1), as amended by section 12001, is further amended by striking ‘‘or 1201(a)’’.
(M) Section 904(b) is amended—
(i) by striking ‘‘or 1201(a)’’ in paragraph (2)(C),
(ii) by striking paragraph (3)(D) and inserting the following:
‘‘(D) CAPITAL GAIN RATE DIFFERENTIAL.—There is a capital gain rate differential for any year if subsection (h)
of section 1 applies to such taxable year.’’, and
(iii) by striking paragraph (3)(E) and inserting the
following:
‘‘(E) RATE DIFFERENTIAL PORTION.—The rate differential portion of foreign source net capital gain, net capital
gain, or the excess of net capital gain from sources within
the United States over net capital gain, as the case may
be, is the same proportion of such amount as—
‘‘(i) the excess of—
‘‘(I) the highest rate of tax set forth in subsection (a), (b), (c), (d), or (e) of section 1 (whichever
applies), over
‘‘(II) the alternative rate of tax determined
under section 1(h), bears to
‘‘(ii) that rate referred to in subclause (I).’’.
(N) Section 1374(b) is amended by striking paragraph (4).
(O) Section 1381(b) is amended by striking ‘‘taxes imposed
by section 11 or 1201’’ and inserting ‘‘tax imposed by section
11’’.
(P) Sections 6425(c)(1)(A), as amended by section 12001,
and 6655(g)(1)(A)(i) are each amended by striking ‘‘or 1201(a),’’.
(Q) Section 7518(g)(6)(A) is amended by striking ‘‘or
1201(a)’’.
(3)(A) Section 1445(e)(1) is amended—
(i) by striking ‘‘35 percent’’ and inserting ‘‘the highest
rate of tax in effect for the taxable year under section
11(b)’’, and
(ii) by striking ‘‘of the gain’’ and inserting ‘‘multiplied
by the gain’’.
(B) Section 1445(e)(2) is amended by striking ‘‘35 percent
of the amount’’ and inserting ‘‘the highest rate of tax in effect
for the taxable year under section 11(b) multiplied by the
amount’’.
(C) Section 1445(e)(6) is amended—
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PUBL097
131 STAT. 2098
PUBLIC LAW 115–97—DEC. 22, 2017
(i) by striking ‘‘35 percent’’ and inserting ‘‘the highest
rate of tax in effect for the taxable year under section
11(b)’’, and
(ii) by striking ‘‘of the amount’’ and inserting ‘‘multiplied by the amount’’.
(D) Section 1446(b)(2)(B) is amended by striking ‘‘section
11(b)(1)’’ and inserting ‘‘section 11(b)’’.
(4) Section 852(b)(1) is amended by striking the last sentence.
(5)(A) Part I of subchapter B of chapter 5 is amended
by striking section 1551 (and by striking the item relating
to such section in the table of sections for such part).
(B) Section 535(c)(5) is amended to read as follows:
‘‘(5) CROSS REFERENCE.—For limitation on credit provided
in paragraph (2) or (3) in the case of certain controlled corporations, see section 1561.’’.
(6)(A) Section 1561, as amended by section 12001, is
amended to read as follows:
26 USC 1446.
26 USC 1551
prec.
‘‘SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS CREDIT IN THE
CASE OF CERTAIN CONTROLLED CORPORATIONS.
‘‘(a) IN GENERAL.—The component members of a controlled
group of corporations on a December 31 shall, for their taxable
years which include such December 31, be limited for purposes
of this subtitle to one $250,000 ($150,000 if any component member
is a corporation described in section 535(c)(2)(B)) amount for purposes of computing the accumulated earnings credit under section
535(c)(2) and (3). Such amount shall be divided equally among
the component members of such group on such December 31 unless
the Secretary prescribes regulations permitting an unequal allocation of such amount.
‘‘(b) CERTAIN SHORT TAXABLE YEARS.—If a corporation has a
short taxable year which does not include a December 31 and
is a component member of a controlled group of corporations with
respect to such taxable year, then for purposes of this subtitle,
the amount to be used in computing the accumulated earnings
credit under section 535(c)(2) and (3) of such corporation for such
taxable year shall be the amount specified in subsection (a) with
respect to such group, divided by the number of corporations which
are component members of such group on the last day of such
taxable year. For purposes of the preceding sentence, section 1563(b)
shall be applied as if such last day were substituted for December
31.’’.
(B) The table of sections for part II of subchapter
B of chapter 5 is amended by striking the item relating
to section 1561 and inserting the following new item:
26 USC 1561
prec.
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‘‘Sec. 1561. Limitation on accumulated earnings credit in the case of certain controlled corporations.’’.
28 USC 11 note.
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(7) Section 7518(g)(6)(A) is amended—
(A) by striking ‘‘With respect to the portion’’ and
inserting ‘‘In the case of a taxpayer other than a corporation, with respect to the portion’’, and
(B) by striking ‘‘(34 percent in the case of a corporation)’’.
(c) EFFECTIVE DATE.—
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2099
(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by subsections (a) and (b) shall
apply to taxable years beginning after December 31, 2017.
(2) WITHHOLDING.—The amendments made by subsection
(b)(3) shall apply to distributions made after December 31,
2017.
(3) CERTAIN TRANSFERS.—The amendments made by subsection (b)(6) shall apply to transfers made after December
31, 2017.
(d) NORMALIZATION REQUIREMENTS.—
(1) IN GENERAL.—A normalization method of accounting
shall not be treated as being used with respect to any public
utility property for purposes of section 167 or 168 of the Internal
Revenue Code of 1986 if the taxpayer, in computing its cost
of service for ratemaking purposes and reflecting operating
results in its regulated books of account, reduces the excess
tax reserve more rapidly or to a greater extent than such
reserve would be reduced under the average rate assumption
method.
(2) ALTERNATIVE METHOD FOR CERTAIN TAXPAYERS.—If, as
of the first day of the taxable year that includes the date
of enactment of this Act—
(A) the taxpayer was required by a regulatory agency
to compute depreciation for public utility property on the
basis of an average life or composite rate method, and
(B) the taxpayer’s books and underlying records did
not contain the vintage account data necessary to apply
the average rate assumption method,
the taxpayer will be treated as using a normalization method
of accounting if, with respect to such jurisdiction, the taxpayer
uses the alternative method for public utility property that
is subject to the regulatory authority of that jurisdiction.
(3) DEFINITIONS.—For purposes of this subsection—
(A) EXCESS TAX RESERVE.—The term ‘‘excess tax
reserve’’ means the excess of—
(i) the reserve for deferred taxes (as described in
section 168(i)(9)(A)(ii) of the Internal Revenue Code
of 1986) as of the day before the corporate rate reductions provided in the amendments made by this section
take effect, over
(ii) the amount which would be the balance in
such reserve if the amount of such reserve were determined by assuming that the corporate rate reductions
provided in this Act were in effect for all prior periods.
(B) AVERAGE RATE ASSUMPTION METHOD.—The average
rate assumption method is the method under which the
excess in the reserve for deferred taxes is reduced over
the remaining lives of the property as used in its regulated
books of account which gave rise to the reserve for deferred
taxes. Under such method, during the time period in which
the timing differences for the property reverse, the amount
of the adjustment to the reserve for the deferred taxes
is calculated by multiplying—
(i) the ratio of the aggregate deferred taxes for
the property to the aggregate timing differences for
the property as of the beginning of the period in question, by
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(ii) the amount of the timing differences which
reverse during such period.
(C) ALTERNATIVE METHOD.—The ‘‘alternative method’’
is the method in which the taxpayer—
(i) computes the excess tax reserve on all public
utility property included in the plant account on the
basis of the weighted average life or composite rate
used to compute depreciation for regulatory purposes,
and
(ii) reduces the excess tax reserve ratably over
the remaining regulatory life of the property.
(4) TAX INCREASED FOR NORMALIZATION VIOLATION.—If, for
any taxable year ending after the date of the enactment of
this Act, the taxpayer does not use a normalization method
of accounting for the corporate rate reductions provided in
the amendments made by this section—
(A) the taxpayer’s tax for the taxable year shall be
increased by the amount by which it reduces its excess
tax reserve more rapidly than permitted under a normalization method of accounting, and
(B) such taxpayer shall not be treated as using a
normalization method of accounting for purposes of subsections (f)(2) and (i)(9)(C) of section 168 of the Internal
Revenue Code of 1986.
SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS TO
REFLECT LOWER CORPORATE INCOME TAX RATES.
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(a) DIVIDENDS RECEIVED BY CORPORATIONS.—
(1) IN GENERAL.—Section 243(a)(1) is amended by striking
‘‘70 percent’’ and inserting ‘‘50 percent’’.
(2) DIVIDENDS FROM 20-PERCENT OWNED CORPORATIONS.—
Section 243(c)(1) is amended—
(A) by striking ‘‘80 percent’’ and inserting ‘‘65 percent’’,
and
(B) by striking ‘‘70 percent’’ and inserting ‘‘50 percent’’.
(3) CONFORMING AMENDMENT.—The heading for section
243(c) is amended by striking ‘‘RETENTION OF 80-PERCENT DIVIDEND RECEIVED DEDUCTION’’ and inserting ‘‘INCREASED
PERCENTAGE’’.
(b) DIVIDENDS RECEIVED FROM FSC.—Section 245(c)(1)(B) is
amended—
(1) by striking ‘‘70 percent’’ and inserting ‘‘50 percent’’,
and
(2) by striking ‘‘80 percent’’ and inserting ‘‘65 percent’’.
(c) LIMITATION ON AGGREGATE AMOUNT OF DEDUCTIONS.—Section 246(b)(3) is amended—
(1) by striking ‘‘80 percent’’ in subparagraph (A) and
inserting ‘‘65 percent’’, and
(2) by striking ‘‘70 percent’’ in subparagraph (B) and
inserting ‘‘50 percent’’.
(d) REDUCTION IN DEDUCTION WHERE PORTFOLIO STOCK IS
DEBT-FINANCED.—Section 246A(a)(1) is amended—
(1) by striking ‘‘70 percent’’ and inserting ‘‘50 percent’’,
and
(2) by striking ‘‘80 percent’’ and inserting ‘‘65 percent’’.
(e) INCOME FROM SOURCES WITHIN THE UNITED STATES.—Section 861(a)(2) is amended—
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(1) by striking ‘‘100/70th’’ and inserting ‘‘100/50th’’ in
subparagraph (B), and
(2) in the flush sentence at the end—
(A) by striking ‘‘100/80th’’ and inserting ‘‘100/65th’’,
and
(B) by striking ‘‘100/70th’’ and inserting ‘‘100/50th’’.
(f) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 243 note.
PART II—SMALL BUSINESS REFORMS
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SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DEPRECIABLE
BUSINESS ASSETS.
(a) INCREASE IN LIMITATION.—
(1) DOLLAR LIMITATION.—Section 179(b)(1) is amended by
striking ‘‘$500,000’’ and inserting ‘‘$1,000,000’’.
(2) REDUCTION IN LIMITATION.—Section 179(b)(2) is
amended by striking ‘‘$2,000,000’’ and inserting ‘‘$2,500,000’’.
(3) INFLATION ADJUSTMENTS.—
(A) IN GENERAL.—Subparagraph (A) of section
179(b)(6), as amended by section 11002(d), is amended—
(i) by striking ‘‘2015’’ and inserting ‘‘2018’’, and
(ii) in clause (ii), by striking ‘‘calendar year 2014’’
and inserting ‘‘calendar year 2017’’.
(B) SPORT UTILITY VEHICLES.—Section 179(b)(6) is
amended—
(i) in subparagraph (A), by striking ‘‘paragraphs
(1) and (2)’’ and inserting ‘‘paragraphs (1), (2), and
(5)(A)’’, and
(ii) in subparagraph (B), by inserting ‘‘($100 in
the case of any increase in the amount under paragraph (5)(A))’’ after ‘‘$10,000’’.
(b) SECTION 179 PROPERTY TO INCLUDE QUALIFIED REAL PROPERTY.—
(1) IN GENERAL.—Subparagraph (B) of section 179(d)(1)
is amended to read as follows:
‘‘(B) which is—
‘‘(i) section 1245 property (as defined in section
1245(a)(3)), or
‘‘(ii) at the election of the taxpayer, qualified real
property (as defined in subsection (f)), and’’.
(2) QUALIFIED REAL PROPERTY DEFINED.—Subsection (f) of
section 179 is amended to read as follows:
‘‘(f) QUALIFIED REAL PROPERTY.—For purposes of this section,
the term ‘qualified real property’ means—
‘‘(1) any qualified improvement property described in section 168(e)(6), and
‘‘(2) any of the following improvements to nonresidential
real property placed in service after the date such property
was first placed in service:
‘‘(A) Roofs.
‘‘(B) Heating, ventilation, and air-conditioning property.
‘‘(C) Fire protection and alarm systems.
‘‘(D) Security systems.’’.
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(c) REPEAL OF EXCLUSION FOR CERTAIN PROPERTY.—The last
sentence of section 179(d)(1) is amended by inserting ‘‘(other than
paragraph (2) thereof)’’ after ‘‘section 50(b)’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to property placed in service in taxable years beginning
after December 31, 2017.
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SEC. 13102. SMALL BUSINESS ACCOUNTING METHOD REFORM AND SIMPLIFICATION.
(a) MODIFICATION OF LIMITATION ON CASH METHOD OF
ACCOUNTING.—
(1) INCREASED LIMITATION.—So much of section 448(c) as
precedes paragraph (2) is amended to read as follows:
‘‘(c) GROSS RECEIPTS TEST.—For purposes of this section—
‘‘(1) IN GENERAL.—A corporation or partnership meets the
gross receipts test of this subsection for any taxable year if
the average annual gross receipts of such entity for the 3taxable-year period ending with the taxable year which precedes such taxable year does not exceed $25,000,000.’’.
(2) APPLICATION OF EXCEPTION ON ANNUAL BASIS.—Section
448(b)(3) is amended to read as follows:
‘‘(3) ENTITIES WHICH MEET GROSS RECEIPTS TEST.—Paragraphs (1) and (2) of subsection (a) shall not apply to any
corporation or partnership for any taxable year if such entity
(or any predecessor) meets the gross receipts test of subsection
(c) for such taxable year.’’.
(3) INFLATION ADJUSTMENT.—Section 448(c) is amended by
adding at the end the following new paragraph:
‘‘(4) ADJUSTMENT FOR INFLATION.—In the case of any taxable year beginning after December 31, 2018, the dollar amount
in paragraph (1) shall be increased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting ‘calendar year 2017’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is
not a multiple of $1,000,000, such amount shall be rounded
to the nearest multiple of $1,000,000.’’.
(4) COORDINATION WITH SECTION 481.—Section 448(d)(7) is
amended to read as follows:
‘‘(7) COORDINATION WITH SECTION 481.—Any change in
method of accounting made pursuant to this section shall be
treated for purposes of section 481 as initiated by the taxpayer
and made with the consent of the Secretary.’’.
(5) APPLICATION OF EXCEPTION TO CORPORATIONS ENGAGED
IN FARMING.—
(A) IN GENERAL.—Section 447(c) is amended—
(i) by inserting ‘‘for any taxable year’’ after ‘‘not
being a corporation’’ in the matter preceding paragraph
(1), and
(ii) by amending paragraph (2) to read as follows:
‘‘(2) a corporation which meets the gross receipts test of
section 448(c) for such taxable year.’’.
(B) COORDINATION WITH SECTION 481.—Section 447(f)
is amended to read as follows:
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131 STAT. 2103
‘‘(f) COORDINATION WITH SECTION 481.—Any change in method
of accounting made pursuant to this section shall be treated for
purposes of section 481 as initiated by the taxpayer and made
with the consent of the Secretary.’’.
(C) CONFORMING AMENDMENTS.—Section 447 is
amended—
(i) by striking subsections (d), (e), (h), and (i),
and
(ii) by redesignating subsections (f) and (g) (as
amended by subparagraph (B)) as subsections (d) and
(e), respectively.
(b) EXEMPTION FROM UNICAP REQUIREMENTS.—
(1) IN GENERAL.—Section 263A is amended by redesignating
subsection (i) as subsection (j) and by inserting after subsection
(h) the following new subsection:
‘‘(i) EXEMPTION FOR CERTAIN SMALL BUSINESSES.—
‘‘(1) IN GENERAL.—In the case of any taxpayer (other than
a tax shelter prohibited from using the cash receipts and
disbursements method of accounting under section 448(a)(3))
which meets the gross receipts test of section 448(c) for any
taxable year, this section shall not apply with respect to such
taxpayer for such taxable year.
‘‘(2) APPLICATION OF GROSS RECEIPTS TEST TO INDIVIDUALS,
ETC.— In the case of any taxpayer which is not a corporation
or a partnership, the gross receipts test of section 448(c) shall
be applied in the same manner as if each trade or business
of such taxpayer were a corporation or partnership.
‘‘(3) COORDINATION WITH SECTION 481.—Any change in
method of accounting made pursuant to this subsection shall
be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.’’.
(2) CONFORMING AMENDMENT.—Section 263A(b)(2) is
amended to read as follows:
‘‘(2) PROPERTY ACQUIRED FOR RESALE.—Real or personal
property described in section 1221(a)(1) which is acquired by
the taxpayer for resale.’’.
(c) EXEMPTION FROM INVENTORIES.—Section 471 is amended
by redesignating subsection (c) as subsection (d) and by inserting
after subsection (b) the following new subsection:
‘‘(c) EXEMPTION FOR CERTAIN SMALL BUSINESSES.—
‘‘(1) IN GENERAL.—In the case of any taxpayer (other than
a tax shelter prohibited from using the cash receipts and
disbursements method of accounting under section 448(a)(3))
which meets the gross receipts test of section 448(c) for any
taxable year—
‘‘(A) subsection (a) shall not apply with respect to such
taxpayer for such taxable year, and
‘‘(B) the taxpayer’s method of accounting for inventory
for such taxable year shall not be treated as failing to
clearly reflect income if such method either—
‘‘(i) treats inventory as non-incidental materials
and supplies, or
‘‘(ii) conforms to such taxpayer’s method of
accounting reflected in an applicable financial statement of the taxpayer with respect to such taxable
year or, if the taxpayer does not have any applicable
financial statement with respect to such taxable year,
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the books and records of the taxpayer prepared in
accordance with the taxpayer’s accounting procedures.
‘‘(2) APPLICABLE FINANCIAL STATEMENT.—For purposes of
this subsection, the term ‘applicable financial statement’ has
the meaning given the term in section 451(b)(3).
‘‘(3) APPLICATION OF GROSS RECEIPTS TEST TO INDIVIDUALS,
ETC.—In the case of any taxpayer which is not a corporation
or a partnership, the gross receipts test of section 448(c) shall
be applied in the same manner as if each trade or business
of such taxpayer were a corporation or partnership.
‘‘(4) COORDINATION WITH SECTION 481.—Any change in
method of accounting made pursuant to this subsection shall
be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.’’.
(d) EXEMPTION FROM PERCENTAGE COMPLETION FOR LONG-TERM
CONTRACTS.—
(1) IN GENERAL.—Section 460(e)(1)(B) is amended—
(A) by inserting ‘‘(other than a tax shelter prohibited
from using the cash receipts and disbursements method
of accounting under section 448(a)(3))’’ after ‘‘taxpayer’’ in
the matter preceding clause (i), and
(B) by amending clause (ii) to read as follows:
‘‘(ii) who meets the gross receipts test of section
448(c) for the taxable year in which such contract
is entered into.’’.
(2) CONFORMING AMENDMENTS.—Section 460(e) is amended
by striking paragraphs (2) and (3), by redesignating paragraphs
(4), (5), and (6) as paragraphs (3), (4), and (5), respectively,
and by inserting after paragraph (1) the following new paragraph:
‘‘(2) RULES RELATED TO GROSS RECEIPTS TEST.—
‘‘(A) APPLICATION OF GROSS RECEIPTS TEST TO INDIVIDUALS, ETC.— For purposes of paragraph (1)(B)(ii), in the
case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be
applied in the same manner as if each trade or business
of such taxpayer were a corporation or partnership.
‘‘(B) COORDINATION WITH SECTION 481.—Any change in
method of accounting made pursuant to paragraph (1)(B)(ii)
shall be treated as initiated by the taxpayer and made
with the consent of the Secretary. Such change shall be
effected on a cut-off basis for all similarly classified contracts entered into on or after the year of change.’’.
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2017.
(2) PRESERVATION OF SUSPENSE ACCOUNT RULES WITH
RESPECT TO ANY EXISTING SUSPENSE ACCOUNTS.—So much of
the amendments made by subsection (a)(5)(C) as relate to section 447(i) of the Internal Revenue Code of 1986 shall not
apply with respect to any suspense account established under
such section before the date of the enactment of this Act.
(3) EXEMPTION FROM PERCENTAGE COMPLETION FOR LONGTERM CONTRACTS.—The amendments made by subsection (d)
shall apply to contracts entered into after December 31, 2017,
in taxable years ending after such date.
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131 STAT. 2105
PART III—COST RECOVERY AND ACCOUNTING
METHODS
Subpart A—Cost Recovery
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SEC. 13201. TEMPORARY 100-PERCENT EXPENSING FOR CERTAIN BUSINESS ASSETS.
(a) INCREASED EXPENSING.—
(1) IN GENERAL.—Section 168(k) is amended—
(A) in paragraph (1)(A), by striking ‘‘50 percent’’ and
inserting ‘‘the applicable percentage’’, and
(B) in paragraph (5)(A)(i), by striking ‘‘50 percent’’
and inserting ‘‘the applicable percentage’’.
(2) APPLICABLE PERCENTAGE.—Paragraph (6) of section
168(k) is amended to read as follows:
‘‘(6) APPLICABLE PERCENTAGE.—For purposes of this subsection—
‘‘(A) IN GENERAL.—Except as otherwise provided in
this paragraph, the term ‘applicable percentage’ means—
‘‘(i) in the case of property placed in service after
September 27, 2017, and before January 1, 2023, 100
percent,
‘‘(ii) in the case of property placed in service after
December 31, 2022, and before January 1, 2024, 80
percent,
‘‘(iii) in the case of property placed in service after
December 31, 2023, and before January 1, 2025, 60
percent,
‘‘(iv) in the case of property placed in service after
December 31, 2024, and before January 1, 2026, 40
percent, and
‘‘(v) in the case of property placed in service after
December 31, 2025, and before January 1, 2027, 20
percent.
‘‘(B) RULE FOR PROPERTY WITH LONGER PRODUCTION
PERIODS.—In the case of property described in subparagraph (B) or (C) of paragraph (2), the term ‘applicable
percentage’ means—
‘‘(i) in the case of property placed in service after
September 27, 2017, and before January 1, 2024, 100
percent,
‘‘(ii) in the case of property placed in service after
December 31, 2023, and before January 1, 2025, 80
percent,
‘‘(iii) in the case of property placed in service after
December 31, 2024, and before January 1, 2026, 60
percent,
‘‘(iv) in the case of property placed in service after
December 31, 2025, and before January 1, 2027, 40
percent, and
‘‘(v) in the case of property placed in service after
December 31, 2026, and before January 1, 2028, 20
percent.
‘‘(C) RULE FOR PLANTS BEARING FRUITS AND NUTS.—
In the case of a specified plant described in paragraph
(5), the term ‘applicable percentage’ means—
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‘‘(i) in the case of a plant which is planted or
grafted after September 27, 2017, and before January
1, 2023, 100 percent,
‘‘(ii) in the case of a plant which is planted or
grafted after December 31, 2022, and before January
1, 2024, 80 percent,
‘‘(iii) in the case of a plant which is planted or
grafted after December 31, 2023, and before January
1, 2025, 60 percent,
‘‘(iv) in the case of a plant which is planted or
grafted after December 31, 2024, and before January
1, 2026, 40 percent, and
‘‘(v) in the case of a plant which is planted or
grafted after December 31, 2025, and before January
1, 2027, 20 percent.’’.
(3) CONFORMING AMENDMENT.—
(A) Paragraph (5) of section 168(k) is amended by
striking subparagraph (F).
(B) Section 168(k) is amended by adding at the end
the following new paragraph:
‘‘(8) PHASE DOWN.—In the case of qualified property
acquired by the taxpayer before September 28, 2017, and placed
in service by the taxpayer after September 27, 2017, paragraph
(6) shall be applied by substituting for each percentage
therein—
‘‘(A) ‘50 percent’ in the case of—
‘‘(i) property placed in service before January 1,
2018, and
‘‘(ii) property described in subparagraph (B) or (C)
of paragraph (2) which is placed in service in 2018,
‘‘(B) ‘40 percent’ in the case of—
‘‘(i) property placed in service in 2018 (other than
property described in subparagraph (B) or (C) of paragraph (2)), and
‘‘(ii) property described in subparagraph (B) or (C)
of paragraph (2) which is placed in service in 2019,
‘‘(C) ‘30 percent’ in the case of—
‘‘(i) property placed in service in 2019 (other than
property described in subparagraph (B) or (C) of paragraph (2)), and
‘‘(ii) property described in subparagraph (B) or (C)
of paragraph (2) which is placed in service in 2020,
and
‘‘(D) ‘0 percent’ in the case of—
‘‘(i) property placed in service after 2019 (other
than property described in subparagraph (B) or (C)
of paragraph (2)), and
‘‘(ii) property described in subparagraph (B) or (C)
of paragraph (2) which is placed in service after 2020.’’.
(b) EXTENSION.—
(1) IN GENERAL.—Section 168(k) is amended—
(A) in paragraph (2)—
(i) in subparagraph (A)(iii), clauses (i)(III) and (ii)
of subparagraph (B), and subparagraph (E)(i), by
striking ‘‘January 1, 2020’’ each place it appears and
inserting ‘‘January 1, 2027’’, and
(ii) in subparagraph (B)—
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131 STAT. 2107
(I) in clause (i)(II), by striking ‘‘January 1,
2021’’ and inserting ‘‘January 1, 2028’’, and
(II) in the heading of clause (ii), by striking
‘‘PRE-JANUARY 1, 2020’’ and inserting ‘‘PRE-JANUARY
1, 2027’’, and
(B) in paragraph (5)(A), by striking ‘‘January 1, 2020’’
and inserting ‘‘January 1, 2027’’.
(2) CONFORMING AMENDMENTS.—
(A) Clause (ii) of section 460(c)(6)(B) is amended by
striking ‘‘January 1, 2020 (January 1, 2021’’ and inserting
‘‘January 1, 2027 (January 1, 2028’’.
(B) The heading of section 168(k) is amended by
striking ‘‘ACQUIRED AFTER DECEMBER 31, 2007, AND
BEFORE JANUARY 1, 2020’’.
(c) APPLICATION TO USED PROPERTY.—
(1) IN GENERAL.—Section 168(k)(2)(A)(ii) is amended to read
as follows:
‘‘(ii) the original use of which begins with the
taxpayer or the acquisition of which by the taxpayer
meets the requirements of clause (ii) of subparagraph
(E), and’’.
(2) ACQUISITION REQUIREMENTS.—Section 168(k)(2)(E)(ii) is
amended to read as follows:
‘‘(ii) ACQUISITION REQUIREMENTS.—An acquisition
of property meets the requirements of this clause if—
‘‘(I) such property was not used by the taxpayer at any time prior to such acquisition, and
‘‘(II) the acquisition of such property meets
the requirements of paragraphs (2)(A), (2)(B),
(2)(C), and (3) of section 179(d).’’,
(3) ANTI-ABUSE RULES.—Section 168(k)(2)(E) is further
amended by amending clause (iii)(I) to read as follows:
‘‘(I) property is used by a lessor of such property and such use is the lessor’s first use of such
property,’’.
(d) EXCEPTION FOR CERTAIN PROPERTY.—Section 168(k), as
amended by this section, is amended by adding at the end the
following new paragraph:
‘‘(9) EXCEPTION FOR CERTAIN PROPERTY.—The term ‘qualified property’ shall not include—
‘‘(A) any property which is primarily used in a trade
or business described in clause (iv) of section 163(j)(7)(A),
or
‘‘(B) any property used in a trade or business that
has had floor plan financing indebtedness (as defined in
paragraph (9) of section 163(j)), if the floor plan financing
interest related to such indebtedness was taken into
account under paragraph (1)(C) of such section.’’.
(e) SPECIAL RULE.—Section 168(k), as amended by this section,
is amended by adding at the end the following new paragraph:
‘‘(10) SPECIAL RULE FOR PROPERTY PLACED IN SERVICE
DURING CERTAIN PERIODS.—
‘‘(A) IN GENERAL.—In the case of qualified property
placed in service by the taxpayer during the first taxable
year ending after September 27, 2017, if the taxpayer
elects to have this paragraph apply for such taxable year,
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PUBLIC LAW 115–97—DEC. 22, 2017
paragraphs (1)(A) and (5)(A)(i) shall be applied by substituting ‘50 percent’ for ‘the applicable percentage’.
‘‘(B) FORM OF ELECTION.—Any election under this paragraph shall be made at such time and in such form and
manner as the Secretary may prescribe.’’.
(f) COORDINATION WITH SECTION 280F.—Clause (iii) of section
168(k)(2)(F) is amended by striking ‘‘placed in service by the taxpayer after December 31, 2017’’ and inserting ‘‘acquired by the
taxpayer before September 28, 2017, and placed in service by the
taxpayer after September 27, 2017’’.
(g) QUALIFIED FILM AND TELEVISION AND LIVE THEATRICAL
PRODUCTIONS.—
(1) IN GENERAL.—Clause (i) of section 168(k)(2)(A), as
amended by section 13204, is amended—
(A) in subclause (II), by striking ‘‘or’’,
(B) in subclause (III), by adding ‘‘or’’ after the comma,
and
(C) by adding at the end the following:
‘‘(IV) which is a qualified film or television production (as defined in subsection (d) of section 181) for
which a deduction would have been allowable under
section 181 without regard to subsections (a)(2) and
(g) of such section or this subsection, or
‘‘(V) which is a qualified live theatrical production
(as defined in subsection (e) of section 181) for which
a deduction would have been allowable under section
181 without regard to subsections (a)(2) and (g) of
such section or this subsection,’’.
(2) PRODUCTION PLACED IN SERVICE.—Paragraph (2) of section 168(k) is amended by adding at the end the following:
‘‘(H) PRODUCTION PLACED IN SERVICE.—For purposes
of subparagraph (A)—
‘‘(i) a qualified film or television production shall
be considered to be placed in service at the time of
initial release or broadcast, and
‘‘(ii) a qualified live theatrical production shall be
considered to be placed in service at the time of the
initial live staged performance.’’.
(h) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided by paragraph (2),
the amendments made by this section shall apply to property
which—
(A) is acquired after September 27, 2017, and
(B) is placed in service after such date.
For purposes of the preceding sentence, property shall not
be treated as acquired after the date on which a written binding
contract is entered into for such acquisition.
(2) SPECIFIED PLANTS.—The amendments made by this section shall apply to specified plants planted or grafted after
September 27, 2017.
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SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITATIONS ON
LUXURY AUTOMOBILES AND PERSONAL USE PROPERTY.
(a) LUXURY AUTOMOBILES.—
(1) IN GENERAL.—280F(a)(1)(A) is amended—
(A) in clause (i), by striking ‘‘$2,560’’ and inserting
‘‘$10,000’’,
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131 STAT. 2109
(B) in clause (ii), by striking ‘‘$4,100’’ and inserting
‘‘$16,000’’,
(C) in clause (iii), by striking ‘‘$2,450’’ and inserting
‘‘$9,600’’, and
(D) in clause (iv), by striking ‘‘$1,475’’ and inserting
‘‘$5,760’’.
(2) CONFORMING AMENDMENTS.—
(A) Clause (ii) of section 280F(a)(1)(B) is amended by
striking ‘‘$1,475’’ in the text and heading and inserting
‘‘$5,760’’.
(B) Paragraph (7) of section 280F(d) is amended—
(i) in subparagraph (A), by striking ‘‘1988’’ and
inserting ‘‘2018’’, and
(ii) in subparagraph (B)(i)(II), by striking ‘‘1987’’
and inserting ‘‘2017’’.
(b) REMOVAL OF COMPUTER EQUIPMENT FROM LISTED PROPERTY.—
(1) IN GENERAL.—Section 280F(d)(4)(A) is amended—
(A) by inserting ‘‘and’’ at the end of clause (iii),
(B) by striking clause (iv), and
(C) by redesignating clause (v) as clause (iv).
(2) CONFORMING AMENDMENT.—Section 280F(d)(4) is
amended by striking subparagraph (B) and by redesignating
subparagraph (C) as subparagraph (B).
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to property placed in service after December 31, 2017,
in taxable years ending after such date.
26 USC 280F.
26 USC 280F
note.
SEC. 13203. MODIFICATIONS OF TREATMENT OF CERTAIN FARM PROPERTY.
(a) TREATMENT OF CERTAIN FARM PROPERTY AS 5-YEAR PROPERTY.—Clause (vii) of section 168(e)(3)(B) is amended by striking
‘‘after December 31, 2008, and which is placed in service before
January 1, 2010’’ and inserting ‘‘after December 31, 2017’’.
(b) REPEAL OF REQUIRED USE OF 150-PERCENT DECLINING BALANCE METHOD.—Section 168(b)(2) is amended by striking subparagraph (B) and by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to property placed in service after December 31, 2017,
in taxable years ending after such date.
26 USC 168 note.
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SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL PROPERTY.
(a) IMPROVEMENTS TO REAL PROPERTY.—
(1) ELIMINATION OF QUALIFIED LEASEHOLD IMPROVEMENT,
QUALIFIED RESTAURANT, AND QUALIFIED RETAIL IMPROVEMENT
PROPERTY.—Subsection (e) of section 168 is amended—
(A) in subparagraph (E) of paragraph (3)—
(i) by striking clauses (iv), (v), and (ix),
(ii) in clause (vii), by inserting ‘‘and’’ at the end,
(iii) in clause (viii), by striking ‘‘, and’’ and
inserting a period, and
(iv) by redesignating clauses (vi), (vii), and (viii),
as so amended, as clauses (iv), (v), and (vi), respectively, and
(B) by striking paragraphs (6), (7), and (8).
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131 STAT. 2110
PUBLIC LAW 115–97—DEC. 22, 2017
(2) APPLICATION OF STRAIGHT LINE METHOD TO QUALIFIED
IMPROVEMENT PROPERTY.—Paragraph (3) of section 168(b) is
amended—
(A) by striking subparagraphs (G), (H), and (I), and
(B) by inserting after subparagraph (F) the following
new subparagraph:
‘‘(G) Qualified improvement property described in subsection (e)(6).’’.
(3) ALTERNATIVE DEPRECIATION SYSTEM.—
(A) ELECTING REAL PROPERTY TRADE OR BUSINESS.—
Subsection (g) of section 168 is amended—
(i) in paragraph (1)—
(I) in subparagraph (D), by striking ‘‘and’’ at
the end,
(II) in subparagraph (E), by inserting ‘‘and’’
at the end, and
(III) by inserting after subparagraph (E) the
following new subparagraph:
‘‘(F) any property described in paragraph (8),’’, and
(ii) by adding at the end the following new paragraph:
‘‘(8) ELECTING REAL PROPERTY TRADE OR BUSINESS.—The
property described in this paragraph shall consist of any nonresidential real property, residential rental property, and qualified improvement property held by an electing real property
trade or business (as defined in 163(j)(7)(B)).’’.
(B) QUALIFIED IMPROVEMENT PROPERTY.—The table
contained in subparagraph (B) of section 168(g)(3) is
amended—
(i) by inserting after the item relating to subparagraph (D)(ii) the following new item:
26 USC 168.
‘‘(D)(v) ........................................................................................................
20’’
, and
(ii) by striking the item relating to subparagraph
(E)(iv) and all that follows through the item relating
to subparagraph (E)(ix) and inserting the following:
‘‘(E)(iv) .......................................................................................................
(E)(v) ..........................................................................................................
(E)(vi) .........................................................................................................
20
30
35’’.
(C) APPLICABLE RECOVERY PERIOD FOR RESIDENTIAL
RENTAL PROPERTY.—The table contained in subparagraph
(C) of section 168(g)(2) is amended by striking clauses
(iii) and (iv) and inserting the following:
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‘‘(iii) Residential rental property ............................................................. 30 years
(iv) Nonresidential real property ............................................................. 40 years
(v) Any railroad grading or tunnel bore or water utility property ....... 50 years’’.
(4) CONFORMING AMENDMENTS.—
(A) Clause (i) of section 168(k)(2)(A) is amended—
(i) in subclause (II), by inserting ‘‘or’’ after the
comma,
(ii) in subclause (III), by striking ‘‘or’’ at the end,
and
(iii) by striking subclause (IV).
(B) Section 168 is amended—
(i) in subsection (e), as amended by paragraph
(1)(B), by adding at the end the following:
‘‘(6) QUALIFIED IMPROVEMENT PROPERTY.—
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2111
‘‘(A) IN GENERAL.—The term ‘qualified improvement
property’ means any improvement to an interior portion
of a building which is nonresidential real property if such
improvement is placed in service after the date such
building was first placed in service.
‘‘(B) CERTAIN IMPROVEMENTS NOT INCLUDED.—Such
term shall not include any improvement for which the
expenditure is attributable to—
‘‘(i) the enlargement of the building,
‘‘(ii) any elevator or escalator, or
‘‘(iii) the internal structural framework of the
building.’’, and
(ii) in subsection (k), by striking paragraph (3).
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to property placed
in service after December 31, 2017.
(2) AMENDMENTS RELATED TO ELECTING REAL PROPERTY
TRADE OR BUSINESS.—The amendments made by subsection
(a)(3)(A) shall apply to taxable years beginning after December
31, 2017.
26 USC 168 note.
SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM FOR
ELECTING FARMING BUSINESSES.
(a) IN GENERAL.—Section 168(g)(1), as amended by section
13204, is amended by striking ‘‘and’’ at the end of subparagraph
(E), by inserting ‘‘and’’ at the end of subparagraph (F), and by
inserting after subparagraph (F) the following new subparagraph:
‘‘(G) any property with a recovery period of 10 years
or more which is held by an electing farming business
(as defined in section 163(j)(7)(C)),’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
SEC.
13206.
AMORTIZATION OF
EXPENDITURES.
RESEARCH
AND
26 USC 168.
26 USC 168 note.
EXPERIMENTAL
(a) IN GENERAL.—Section 174 is amended to read as follows:
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‘‘SEC.
174.
AMORTIZATION
EXPENDITURES.
OF
RESEARCH
AND
EXPERIMENTAL
‘‘(a) IN GENERAL.—In the case of a taxpayer’s specified research
or experimental expenditures for any taxable year—
‘‘(1) except as provided in paragraph (2), no deduction shall
be allowed for such expenditures, and
‘‘(2) the taxpayer shall—
‘‘(A) charge such expenditures to capital account, and
‘‘(B) be allowed an amortization deduction of such
expenditures ratably over the 5-year period (15-year period
in the case of any specified research or experimental
expenditures which are attributable to foreign research
(within the meaning of section 41(d)(4)(F))) beginning with
the midpoint of the taxable year in which such expenditures
are paid or incurred.
‘‘(b) SPECIFIED RESEARCH OR EXPERIMENTAL EXPENDITURES.—
For purposes of this section, the term ‘specified research or experimental expenditures’ means, with respect to any taxable year,
research or experimental expenditures which are paid or incurred
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131 STAT. 2112
26 USC 174 note.
26 USC
prec. 161.
PUBLIC LAW 115–97—DEC. 22, 2017
by the taxpayer during such taxable year in connection with the
taxpayer’s trade or business.
‘‘(c) SPECIAL RULES.—
‘‘(1) LAND AND OTHER PROPERTY.—This section shall not
apply to any expenditure for the acquisition or improvement
of land, or for the acquisition or improvement of property to
be used in connection with the research or experimentation
and of a character which is subject to the allowance under
section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes
of this section allowances under section 167, and allowances
under section 611, shall be considered as expenditures.
‘‘(2) EXPLORATION EXPENDITURES.—This section shall not
apply to any expenditure paid or incurred for the purpose
of ascertaining the existence, location, extent, or quality of
any deposit of ore or other mineral (including oil and gas).
‘‘(3) SOFTWARE DEVELOPMENT.—For purposes of this section, any amount paid or incurred in connection with the
development of any software shall be treated as a research
or experimental expenditure.
‘‘(d) TREATMENT UPON DISPOSITION, RETIREMENT, OR ABANDONMENT.—If any property with respect to which specified research
or experimental expenditures are paid or incurred is disposed,
retired, or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section,
no deduction shall be allowed with respect to such expenditures
on account of such disposition, retirement, or abandonment and
such amortization deduction shall continue with respect to such
expenditures.’’.
(b) CHANGE IN METHOD OF ACCOUNTING.—The amendments
made by subsection (a) shall be treated as a change in method
of accounting for purposes of section 481 of the Internal Revenue
Code of 1986 and—
(1) such change shall be treated as initiated by the taxpayer,
(2) such change shall be treated as made with the consent
of the Secretary, and
(3) such change shall be applied only on a cut-off basis
for any research or experimental expenditures paid or incurred
in taxable years beginning after December 31, 2021, and no
adjustments under section 481(a) shall be made.
(c) CLERICAL AMENDMENT.—The table of sections for part VI
of subchapter B of chapter 1 is amended by striking the item
relating to section 174 and inserting the following new item:
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‘‘Sec. 174. Amortization of research and experimental expenditures.’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 41(d)(1)(A) is amended by striking ‘‘expenses
under section 174’’ and inserting ‘‘specified research or experimental expenditures under section 174’’.
(2) Subsection (c) of section 280C is amended—
(A) by striking paragraph (1) and inserting the following:
‘‘(1) IN GENERAL.—If—
‘‘(A) the amount of the credit determined for the taxable
year under section 41(a)(1), exceeds
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131 STAT. 2113
‘‘(B) the amount allowable as a deduction for such
taxable year for qualified research expenses or basic
research expenses,
the amount chargeable to capital account for the taxable year
for such expenses shall be reduced by the amount of such
excess.’’,
(B) by striking paragraph (2),
(C) by redesignating paragraphs (3) (as amended by
this Act) and (4) as paragraphs (2) and (3), respectively,
and
(D) in paragraph (2), as redesignated by subparagraph
(C), by striking ‘‘paragraphs (1) and (2)’’ and inserting
‘‘paragraph (1)’’.
(e) EFFECTIVE DATE.—The amendments made by this section
shall apply to amounts paid or incurred in taxable years beginning
after December 31, 2021.
26 USC 41 note.
SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANTING CITRUS
PLANTS LOST BY REASON OF CASUALTY.
(a) IN GENERAL.—Section 263A(d)(2) is amended by adding
at the end the following new subparagraph:
‘‘(C) SPECIAL TEMPORARY RULE FOR CITRUS PLANTS LOST
BY REASON OF CASUALTY.—
‘‘(i) IN GENERAL.—In the case of the replanting
of citrus plants, subparagraph (A) shall apply to
amounts paid or incurred by a person (other than
the taxpayer described in subparagraph (A)) if—
‘‘(I) the taxpayer described in subparagraph
(A) has an equity interest of not less than 50
percent in the replanted citrus plants at all times
during the taxable year in which such amounts
were paid or incurred and such other person holds
any part of the remaining equity interest, or
‘‘(II) such other person acquired the entirety
of such taxpayer’s equity interest in the land on
which the lost or damaged citrus plants were
located at the time of such loss or damage, and
the replanting is on such land.
‘‘(ii) TERMINATION.—Clause (i) shall not apply to
any cost paid or incurred after the date which is 10
years after the date of the enactment of the Tax Cuts
and Jobs Act.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to costs paid or incurred after the date of the enactment
of this Act.
26 USC 263A.
26 USC 263A
note.
Subpart B—Accounting Methods
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SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR OF INCLUSION.
(a) INCLUSION NOT LATER THAN FOR FINANCIAL ACCOUNTING
PURPOSES.—Section 451 is amended by redesignating subsections
(b) through (i) as subsections (c) through (j), respectively, and by
inserting after subsection (a) the following new subsection:
‘‘(b) INCLUSION NOT LATER THAN FOR FINANCIAL ACCOUNTING
PURPOSES.—
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PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(1) INCOME
TAKEN INTO ACCOUNT IN FINANCIAL STATE-
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MENT.—
‘‘(A) IN GENERAL.—In the case of a taxpayer the taxable
income of which is computed under an accrual method
of accounting, the all events test with respect to any item
of gross income (or portion thereof) shall not be treated
as met any later than when such item (or portion thereof)
is taken into account as revenue in—
‘‘(i) an applicable financial statement of the taxpayer, or
‘‘(ii) such other financial statement as the Secretary may specify for purposes of this subsection.
‘‘(B) EXCEPTION.—This paragraph shall not apply to—
‘‘(i) a taxpayer which does not have a financial
statement described in clause (i) or (ii) of subparagraph
(A) for a taxable year, or
‘‘(ii) any item of gross income in connection with
a mortgage servicing contract.
‘‘(C) ALL EVENTS TEST.—For purposes of this section,
the all events test is met with respect to any item of
gross income if all the events have occurred which fix
the right to receive such income and the amount of such
income can be determined with reasonable accuracy.
‘‘(2)
COORDINATION
WITH
SPECIAL
METHODS
OF
ACCOUNTING.—Paragraph (1) shall not apply with respect to
any item of gross income for which the taxpayer uses a special
method of accounting provided under any other provision of
this chapter, other than any provision of part V of subchapter
P (except as provided in clause (ii) of paragraph (1)(B)).
‘‘(3) APPLICABLE FINANCIAL STATEMENT.—For purposes of
this subsection, the term ‘applicable financial statement’
means—
‘‘(A) a financial statement which is certified as being
prepared in accordance with generally accepted accounting
principles and which is—
‘‘(i) a 10–K (or successor form), or annual statement to shareholders, required to be filed by the taxpayer with the United States Securities and Exchange
Commission,
‘‘(ii) an audited financial statement of the taxpayer
which is used for—
‘‘(I) credit purposes,
‘‘(II) reporting to shareholders, partners, or
other proprietors, or to beneficiaries, or
‘‘(III) any other substantial nontax purpose,
but only if there is no statement of the taxpayer
described in clause (i), or
‘‘(iii) filed by the taxpayer with any other Federal
agency for purposes other than Federal tax purposes,
but only if there is no statement of the taxpayer
described in clause (i) or (ii),
‘‘(B) a financial statement which is made on the basis
of international financial reporting standards and is filed
by the taxpayer with an agency of a foreign government
which is equivalent to the United States Securities and
Exchange Commission and which has reporting standards
not less stringent than the standards required by such
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2115
Commission, but only if there is no statement of the taxpayer described in subparagraph (A), or
‘‘(C) a financial statement filed by the taxpayer with
any other regulatory or governmental body specified by
the Secretary, but only if there is no statement of the
taxpayer described in subparagraph (A) or (B).
‘‘(4) ALLOCATION OF TRANSACTION PRICE.—For purposes of
this subsection, in the case of a contract which contains multiple
performance obligations, the allocation of the transaction price
to each performance obligation shall be equal to the amount
allocated to each performance obligation for purposes of
including such item in revenue in the applicable financial statement of the taxpayer.
‘‘(5) GROUP OF ENTITIES.—For purposes of paragraph (1),
if the financial results of a taxpayer are reported on the
applicable financial statement (as defined in paragraph (3))
for a group of entities, such statement shall be treated as
the applicable financial statement of the taxpayer.’’.
(b) TREATMENT OF ADVANCE PAYMENTS.—Section 451, as
amended by subsection (a), is amended by redesignating subsections
(c) through (j) as subsections (d) through (k), respectively, and
by inserting after subsection (b) the following new subsection:
‘‘(c) TREATMENT OF ADVANCE PAYMENTS.—
‘‘(1) IN GENERAL.—A taxpayer which computes taxable
income under the accrual method of accounting, and receives
any advance payment during the taxable year, shall—
‘‘(A) except as provided in subparagraph (B), include
such advance payment in gross income for such taxable
year, or
‘‘(B) if the taxpayer elects the application of this
subparagraph with respect to the category of advance payments to which such advance payment belongs, the taxpayer shall—
‘‘(i) to the extent that any portion of such advance
payment is required under subsection (b) to be included
in gross income in the taxable year in which such
payment is received, so include such portion, and
‘‘(ii) include the remaining portion of such advance
payment in gross income in the taxable year following
the taxable year in which such payment is received.
‘‘(2) ELECTION.—
‘‘(A) IN GENERAL.—Except as otherwise provided in
this paragraph, the election under paragraph (1)(B) shall
be made at such time, in such form and manner, and
with respect to such categories of advance payments, as
the Secretary may provide.
‘‘(B) PERIOD TO WHICH ELECTION APPLIES.—An election
under paragraph (1)(B) shall be effective for the taxable
year with respect to which it is first made and for all
subsequent taxable years, unless the taxpayer secures the
consent of the Secretary to revoke such election. For purposes of this title, the computation of taxable income under
an election made under paragraph (1)(B) shall be treated
as a method of accounting.
‘‘(3) TAXPAYERS CEASING TO EXIST.—Except as otherwise
provided by the Secretary, the election under paragraph (1)(B)
shall not apply with respect to advance payments received
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26 USC 451.
PUBL097
131 STAT. 2116
26 USC 451 note.
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26 USC 451 note.
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PUBLIC LAW 115–97—DEC. 22, 2017
by the taxpayer during a taxable year if such taxpayer ceases
to exist during (or with the close of) such taxable year.
‘‘(4) ADVANCE PAYMENT.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘advance payment’ means
any payment—
‘‘(i) the full inclusion of which in the gross income
of the taxpayer for the taxable year of receipt is a
permissible method of accounting under this section
(determined without regard to this subsection),
‘‘(ii) any portion of which is included in revenue
by the taxpayer in a financial statement described
in clause (i) or (ii) of subsection (b)(1)(A) for a subsequent taxable year, and
‘‘(iii) which is for goods, services, or such other
items as may be identified by the Secretary for purposes of this clause.
‘‘(B) EXCLUSIONS.—Except as otherwise provided by
the Secretary, such term shall not include—
‘‘(i) rent,
‘‘(ii) insurance premiums governed by subchapter
L,
‘‘(iii) payments with respect to financial
instruments,
‘‘(iv) payments with respect to warranty or guarantee contracts under which a third party is the primary obligor,
‘‘(v) payments subject to section 871(a), 881, 1441,
or 1442,
‘‘(vi) payments in property to which section 83
applies, and
‘‘(vii) any other payment identified by the Secretary for purposes of this subparagraph.
‘‘(C) RECEIPT.—For purposes of this subsection, an item
of gross income is received by the taxpayer if it is actually
or constructively received, or if it is due and payable to
the taxpayer.
‘‘(D) ALLOCATION OF TRANSACTION PRICE.—For purposes of this subsection, rules similar to subsection (b)(4)
shall apply.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
(d) COORDINATION WITH SECTION 481.—
(1) IN GENERAL.—In the case of any qualified change in
method of accounting for the taxpayer’s first taxable year beginning after December 31, 2017—
(A) such change shall be treated as initiated by the
taxpayer, and
(B) such change shall be treated as made with the
consent of the Secretary of the Treasury.
(2) QUALIFIED CHANGE IN METHOD OF ACCOUNTING.—For
purposes of this subsection, the term ‘‘qualified change in
method of accounting’’ means any change in method of
accounting which—
(A) is required by the amendments made by this section, or
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131 STAT. 2117
(B) was prohibited under the Internal Revenue Code
of 1986 prior to such amendments and is permitted under
such Code after such amendments.
(e) SPECIAL RULES FOR ORIGINAL ISSUE DISCOUNT.—Notwithstanding subsection (c), in the case of income from a debt instrument
having original issue discount—
(1) the amendments made by this section shall apply to
taxable years beginning after December 31, 2018, and
(2) the period for taking into account any adjustments
under section 481 by reason of a qualified change in method
of accounting (as defined in subsection (d)) shall be 6 years.
26 USC 451 note.
PART IV—BUSINESS-RELATED EXCLUSIONS
AND DEDUCTIONS
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SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST.
(a) IN GENERAL.—Section 163(j) is amended to read as follows:
‘‘(j) LIMITATION ON BUSINESS INTEREST.—
‘‘(1) IN GENERAL.—The amount allowed as a deduction
under this chapter for any taxable year for business interest
shall not exceed the sum of—
‘‘(A) the business interest income of such taxpayer
for such taxable year,
‘‘(B) 30 percent of the adjusted taxable income of such
taxpayer for such taxable year, plus
‘‘(C) the floor plan financing interest of such taxpayer
for such taxable year.
The amount determined under subparagraph (B) shall not be
less than zero.
‘‘(2) CARRYFORWARD OF DISALLOWED BUSINESS INTEREST.—
The amount of any business interest not allowed as a deduction
for any taxable year by reason of paragraph (1) shall be treated
as business interest paid or accrued in the succeeding taxable
year.
‘‘(3) EXEMPTION FOR CERTAIN SMALL BUSINESSES.—In the
case of any taxpayer (other than a tax shelter prohibited from
using the cash receipts and disbursements method of accounting
under section 448(a)(3)) which meets the gross receipts test
of section 448(c) for any taxable year, paragraph (1) shall
not apply to such taxpayer for such taxable year. In the case
of any taxpayer which is not a corporation or a partnership,
the gross receipts test of section 448(c) shall be applied in
the same manner as if such taxpayer were a corporation or
partnership.
‘‘(4) APPLICATION TO PARTNERSHIPS, ETC.—
‘‘(A) IN GENERAL.—In the case of any partnership—
‘‘(i) this subsection shall be applied at the partnership level and any deduction for business interest shall
be taken into account in determining the non-separately stated taxable income or loss of the partnership,
and
‘‘(ii) the adjusted taxable income of each partner
of such partnership—
‘‘(I) shall be determined without regard to such
partner’s distributive share of any items of income,
gain, deduction, or loss of such partnership, and
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‘‘(II) shall be increased by such partner’s
distributive share of such partnership’s excess taxable income.
For purposes of clause (ii)(II), a partner’s distributive
share of partnership excess taxable income shall be
determined in the same manner as the partner’s
distributive share of nonseparately stated taxable
income or loss of the partnership.
‘‘(B) SPECIAL RULES FOR CARRYFORWARDS.—
‘‘(i) IN GENERAL.—The amount of any business
interest not allowed as a deduction to a partnership
for any taxable year by reason of paragraph (1) for
any taxable year—
‘‘(I) shall not be treated under paragraph (2)
as business interest paid or accrued by the partnership in the succeeding taxable year, and
‘‘(II) shall, subject to clause (ii), be treated
as excess business interest which is allocated to
each partner in the same manner as the nonseparately stated taxable income or loss of the
partnership.
‘‘(ii) TREATMENT OF EXCESS BUSINESS INTEREST
ALLOCATED TO PARTNERS.—If a partner is allocated
any excess business interest from a partnership under
clause (i) for any taxable year—
‘‘(I) such excess business interest shall be
treated as business interest paid or accrued by
the partner in the next succeeding taxable year
in which the partner is allocated excess taxable
income from such partnership, but only to the
extent of such excess taxable income, and
‘‘(II) any portion of such excess business
interest remaining after the application of subclause (I) shall, subject to the limitations of subclause (I), be treated as business interest paid
or accrued in succeeding taxable years.
For purposes of applying this paragraph, excess taxable
income allocated to a partner from a partnership for
any taxable year shall not be taken into account under
paragraph (1)(A) with respect to any business interest
other than excess business interest from the partnership until all such excess business interest for such
taxable year and all preceding taxable years has been
treated as paid or accrued under clause (ii).
‘‘(iii) BASIS ADJUSTMENTS.—
‘‘(I) IN GENERAL.—The adjusted basis of a
partner in a partnership interest shall be reduced
(but not below zero) by the amount of excess business interest allocated to the partner under clause
(i)(II).
‘‘(II) SPECIAL RULE FOR DISPOSITIONS.—If a
partner disposes of a partnership interest, the
adjusted basis of the partner in the partnership
interest shall be increased immediately before the
disposition by the amount of the excess (if any)
of the amount of the basis reduction under subclause (I) over the portion of any excess business
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131 STAT. 2119
interest allocated to the partner under clause (i)(II)
which has previously been treated under clause
(ii) as business interest paid or accrued by the
partner. The preceding sentence shall also apply
to transfers of the partnership interest (including
by reason of death) in a transaction in which gain
is not recognized in whole or in part. No deduction
shall be allowed to the transferor or transferee
under this chapter for any excess business interest
resulting in a basis increase under this subclause.
‘‘(C) EXCESS TAXABLE INCOME.—The term ‘excess taxable income’ means, with respect to any partnership, the
amount which bears the same ratio to the partnership’s
adjusted taxable income as—
‘‘(i) the excess (if any) of—
‘‘(I) the amount determined for the partnership
under paragraph (1)(B), over
‘‘(II) the amount (if any) by which the business
interest of the partnership, reduced by the floor
plan financing interest, exceeds the business
interest income of the partnership, bears to
‘‘(ii) the amount determined for the partnership
under paragraph (1)(B).
‘‘(D) APPLICATION TO S CORPORATIONS.—Rules similar
to the rules of subparagraphs (A) and (C) shall apply with
respect to any S corporation and its shareholders.
‘‘(5) BUSINESS INTEREST.—For purposes of this subsection,
the term ‘business interest’ means any interest paid or accrued
on indebtedness properly allocable to a trade or business. Such
term shall not include investment interest (within the meaning
of subsection (d)).
‘‘(6) BUSINESS INTEREST INCOME.—For purposes of this subsection, the term ‘business interest income’ means the amount
of interest includible in the gross income of the taxpayer for
the taxable year which is properly allocable to a trade or
business. Such term shall not include investment income
(within the meaning of subsection (d)).
‘‘(7) TRADE OR BUSINESS.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘trade or business’ shall
not include—
‘‘(i) the trade or business of performing services
as an employee,
‘‘(ii) any electing real property trade or business,
‘‘(iii) any electing farming business, or
‘‘(iv) the trade or business of the furnishing or
sale of—
‘‘(I) electrical energy, water, or sewage disposal
services,
‘‘(II) gas or steam through a local distribution
system, or
‘‘(III) transportation of gas or steam by pipeline,
if the rates for such furnishing or sale, as the case
may be, have been established or approved by a State
or political subdivision thereof, by any agency or
instrumentality of the United States, by a public
service or public utility commission or other similar
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131 STAT. 2120
PUBLIC LAW 115–97—DEC. 22, 2017
body of any State or political subdivision thereof, or
by the governing or ratemaking body of an electric
cooperative.
‘‘(B) ELECTING REAL PROPERTY TRADE OR BUSINESS.—
For purposes of this paragraph, the term ‘electing real
property trade or business’ means any trade or business
which is described in section 469(c)(7)(C) and which makes
an election under this subparagraph. Any such election
shall be made at such time and in such manner as the
Secretary shall prescribe, and, once made, shall be irrevocable.
‘‘(C) ELECTING FARMING BUSINESS.—For purposes of
this paragraph, the term ‘electing farming business’
means—
‘‘(i) a farming business (as defined in section
263A(e)(4)) which makes an election under this
subparagraph, or
‘‘(ii) any trade or business of a specified agricultural or horticultural cooperative (as defined in section
199A(g)(2)) with respect to which the cooperative
makes an election under this subparagraph.
Any such election shall be made at such time and in
such manner as the Secretary shall prescribe, and, once
made, shall be irrevocable.
‘‘(8) ADJUSTED TAXABLE INCOME.—For purposes of this subsection, the term ‘adjusted taxable income’ means the taxable
income of the taxpayer—
‘‘(A) computed without regard to—
‘‘(i) any item of income, gain, deduction, or loss
which is not properly allocable to a trade or business,
‘‘(ii) any business interest or business interest
income,
‘‘(iii) the amount of any net operating loss deduction under section 172,
‘‘(iv) the amount of any deduction allowed under
section 199A, and
‘‘(v) in the case of taxable years beginning before
January 1, 2022, any deduction allowable for depreciation, amortization, or depletion, and
‘‘(B) computed with such other adjustments as provided
by the Secretary.
‘‘(9) FLOOR PLAN FINANCING INTEREST DEFINED.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘floor plan financing
interest’ means interest paid or accrued on floor plan
financing indebtedness.
‘‘(B) FLOOR PLAN FINANCING INDEBTEDNESS.—The term
‘floor plan financing indebtedness’ means indebtedness—
‘‘(i) used to finance the acquisition of motor vehicles
held for sale or lease, and
‘‘(ii) secured by the inventory so acquired.
‘‘(C) MOTOR VEHICLE.—The term ‘motor vehicle’ means
a motor vehicle that is any of the following:
‘‘(i) Any self-propelled vehicle designed for transporting persons or property on a public street, highway,
or road.
‘‘(ii) A boat.
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131 STAT. 2121
‘‘(iii) Farm machinery or equipment.
‘‘(10) CROSS REFERENCES.—
‘‘(A) For requirement that an electing real property
trade or business use the alternative depreciation system,
see section 168(g)(1)(F).
‘‘(B) For requirement that an electing farming business
use the alternative depreciation system, see section
168(g)(1)(G).’’.
(b) TREATMENT OF CARRYFORWARD OF DISALLOWED BUSINESS
INTEREST IN CERTAIN CORPORATE ACQUISITIONS.—
(1) IN GENERAL.—Section 381(c) is amended by inserting
after paragraph (19) the following new paragraph:
‘‘(20) CARRYFORWARD OF DISALLOWED BUSINESS INTEREST.—
The carryover of disallowed business interest described in section 163(j)(2) to taxable years ending after the date of distribution or transfer.’’.
(2) APPLICATION OF LIMITATION.—Section 382(d) is amended
by adding at the end the following new paragraph:
‘‘(3) APPLICATION TO CARRYFORWARD OF DISALLOWED
INTEREST.—The term ‘pre-change loss’ shall include any carryover of disallowed interest described in section 163(j)(2) under
rules similar to the rules of paragraph (1).’’.
(3) CONFORMING AMENDMENT.—Section 382(k)(1) is
amended by inserting after the first sentence the following:
‘‘Such term shall include any corporation entitled to use a
carryforward of disallowed interest described in section
381(c)(20).’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 381.
26 USC 163 note.
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SEC. 13302. MODIFICATION OF NET OPERATING LOSS DEDUCTION.
(a) LIMITATION ON DEDUCTION.—
(1) IN GENERAL.—Section 172(a) is amended to read as
follows:
‘‘(a) DEDUCTION ALLOWED.—There shall be allowed as a deduction for the taxable year an amount equal to the lesser of—
‘‘(1) the aggregate of the net operating loss carryovers
to such year, plus the net operating loss carrybacks to such
year, or
‘‘(2) 80 percent of taxable income computed without regard
to the deduction allowable under this section.
For purposes of this subtitle, the term ‘net operating loss deduction’
means the deduction allowed by this subsection.’’.
(2) COORDINATION OF LIMITATION WITH CARRYBACKS AND
CARRYOVERS.—Section 172(b)(2) is amended by striking ‘‘shall
be computed—’’ and all that follows and inserting ‘‘shall—
‘‘(A) be computed with the modifications specified in
subsection (d) other than paragraphs (1), (4), and (5)
thereof, and by determining the amount of the net operating loss deduction without regard to the net operating
loss for the loss year or for any taxable year thereafter,
‘‘(B) not be considered to be less than zero, and
‘‘(C) not exceed the amount determined under subsection (a)(2) for such prior taxable year.’’.
(3) CONFORMING AMENDMENT.—Section 172(d)(6) is
amended by striking ‘‘and’’ at the end of subparagraph (A),
by striking the period at the end of subparagraph (B) and
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PUBLIC LAW 115–97—DEC. 22, 2017
inserting ‘‘; and’’, and by adding at the end the following new
subparagraph:
‘‘(C) subsection (a)(2) shall be applied by substituting
‘real estate investment trust taxable income (as defined
in section 857(b)(2) but without regard to the deduction
for dividends paid (as defined in section 561))’ for ‘taxable
income’.’’.
(b) REPEAL OF NET OPERATING LOSS CARRYBACK; INDEFINITE
CARRYFORWARD.—
(1) IN GENERAL.—Section 172(b)(1)(A) is amended—
(A) by striking ‘‘shall be a net operating loss carryback
to each of the 2 taxable years’’ in clause (i) and inserting
‘‘except as otherwise provided in this paragraph, shall not
be a net operating loss carryback to any taxable year’’,
and
(B) by striking ‘‘to each of the 20 taxable years’’ in
clause (ii) and inserting ‘‘to each taxable year’’.
(2) CONFORMING AMENDMENT.—Section 172(b)(1) is
amended by striking subparagraphs (B) through (F).
(c) TREATMENT OF FARMING LOSSES.—
(1) ALLOWANCE OF CARRYBACKS.—Section 172(b)(1), as
amended by subsection (b)(2), is amended by adding at the
end the following new subparagraph:
‘‘(B) FARMING LOSSES.—
‘‘(i) IN GENERAL.—In the case of any portion of
a net operating loss for the taxable year which is
a farming loss with respect to the taxpayer, such loss
shall be a net operating loss carryback to each of
the 2 taxable years preceding the taxable year of such
loss.
‘‘(ii) FARMING LOSS.—For purposes of this section,
the term ‘farming loss’ means the lesser of—
‘‘(I) the amount which would be the net operating loss for the taxable year if only income and
deductions attributable to farming businesses (as
defined in section 263A(e)(4)) are taken into
account, or
‘‘(II) the amount of the net operating loss for
such taxable year.
‘‘(iii) COORDINATION WITH PARAGRAPH (2).—For purposes of applying paragraph (2), a farming loss for
any taxable year shall be treated as a separate net
operating loss for such taxable year to be taken into
account after the remaining portion of the net operating loss for such taxable year.
‘‘(iv) ELECTION.—Any taxpayer entitled to a 2-year
carryback under clause (i) from any loss year may
elect not to have such clause apply to such loss year.
Such election shall be made in such manner as prescribed by the Secretary and shall be made by the
due date (including extensions of time) for filing the
taxpayer’s return for the taxable year of the net operating loss. Such election, once made for any taxable
year, shall be irrevocable for such taxable year.’’.
(2) CONFORMING AMENDMENTS.—
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131 STAT. 2123
(A) Section 172 is amended by striking subsections
(f), (g), and (h), and by redesignating subsection (i) as
subsection (f).
(B) Section 537(b)(4) is amended by inserting ‘‘(as in
effect before the date of enactment of the Tax Cuts and
Jobs Act)’’ after ‘‘as defined in section 172(f)’’.
(d) TREATMENT OF CERTAIN INSURANCE LOSSES.—
(1) TREATMENT OF CARRYFORWARDS AND CARRYBACKS.—Section 172(b)(1), as amended by subsections (b)(2) and (c)(1),
is amended by adding at the end the following new subparagraph:
‘‘(C) INSURANCE COMPANIES.—In the case of an insurance company (as defined in section 816(a)) other than
a life insurance company, the net operating loss for any
taxable year—
‘‘(i) shall be a net operating loss carryback to each
of the 2 taxable years preceding the taxable year of
such loss, and
‘‘(ii) shall be a net operating loss carryover to
each of the 20 taxable years following the taxable
year of the loss.’’.
(2) EXEMPTION FROM LIMITATION.—Section 172, as amended
by subsection (c)(2)(A), is amended by redesignating subsection
(f) as subsection (g) and inserting after subsection (e) the following new subsection:
‘‘(f) SPECIAL RULE FOR INSURANCE COMPANIES.—In the case
of an insurance company (as defined in section 816(a)) other than
a life insurance company—
‘‘(1) the amount of the deduction allowed under subsection
(a) shall be the aggregate of the net operating loss carryovers
to such year, plus the net operating loss carrybacks to such
year, and
‘‘(2) subparagraph (C) of subsection (b)(2) shall not apply.’’.
(e) EFFECTIVE DATE.—
(1) NET OPERATING LOSS LIMITATION.—The amendments
made by subsections (a) and (d)(2) shall apply to losses arising
in taxable years beginning after December 31, 2017.
(2) CARRYFORWARDS AND CARRYBACKS.—The amendments
made by subsections (b), (c), and (d)(1) shall apply to net
operating losses arising in taxable years ending after December
31, 2017.
26 USC 172.
26 USC 172 note.
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SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY.
(a) IN GENERAL.—Section 1031(a)(1) is amended by striking
‘‘property’’ each place it appears and inserting ‘‘real property’’.
(b) CONFORMING AMENDMENTS.—
(1)(A) Paragraph (2) of section 1031(a) is amended to read
as follows:
‘‘(2) EXCEPTION FOR REAL PROPERTY HELD FOR SALE.—This
subsection shall not apply to any exchange of real property
held primarily for sale.’’.
(B) Section 1031 is amended by striking subsection (i).
(2) Section 1031 is amended by striking subsection (e).
(3) Section 1031, as amended by paragraph (2), is amended
by inserting after subsection (d) the following new subsection:
‘‘(e) APPLICATION TO CERTAIN PARTNERSHIPS.—For purposes of
this section, an interest in a partnership which has in effect a
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prec. 1031.
PUBLIC LAW 115–97—DEC. 22, 2017
valid election under section 761(a) to be excluded from the application of all of subchapter K shall be treated as an interest in
each of the assets of such partnership and not as an interest
in a partnership.’’.
(4) Section 1031(h) is amended to read as follows:
‘‘(h) SPECIAL RULES FOR FOREIGN REAL PROPERTY.—Real property located in the United States and real property located outside
the United States are not property of a like kind.’’.
(5) The heading of section 1031 is amended by striking
‘‘PROPERTY’’ and inserting ‘‘REAL PROPERTY’’.
(6) The table of sections for part III of subchapter O of
chapter 1 is amended by striking the item relating to section
1031 and inserting the following new item:
‘‘Sec. 1031. Exchange of real property held for productive use or investment.’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to
exchanges completed after December 31, 2017.
(2) TRANSITION RULE.—The amendments made by this section shall not apply to any exchange if—
(A) the property disposed of by the taxpayer in the
exchange is disposed of on or before December 31, 2017,
or
(B) the property received by the taxpayer in the
exchange is received on or before December 31, 2017.
26 USC 1031
note.
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SEC. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF EXPENSES
FOR FRINGE BENEFITS.
(a) NO DEDUCTION ALLOWED FOR ENTERTAINMENT EXPENSES.—
(1) IN GENERAL.—Section 274(a) is amended—
(A) in paragraph (1)(A), by striking ‘‘unless’’ and all
that follows through ‘‘trade or business,’’,
(B) by striking the flush sentence at the end of paragraph (1), and
(C) by striking paragraph (2)(C).
(2) CONFORMING AMENDMENTS.—
(A) Section 274(d) is amended—
(i) by striking paragraph (2) and redesignating
paragraphs (3) and (4) as paragraphs (2) and (3),
respectively, and
(ii) in the flush text following paragraph (3) (as
so redesignated)—
(I) by striking ‘‘, entertainment, amusement,
recreation, or use of the facility or property,’’ in
item (B), and
(II) by striking ‘‘(D) the business relationship
to the taxpayer of persons entertained, using the
facility or property, or receiving the gift’’ and
inserting ‘‘(D) the business relationship to the taxpayer of the person receiving the benefit’’,
(B) Section 274 is amended by striking subsection (l).
(C) Section 274(n) is amended by striking ‘‘AND ENTERTAINMENT’’ in the heading.
(D) Section 274(n)(1) is amended to read as follows:
‘‘(1) IN GENERAL.—The amount allowable as a deduction
under this chapter for any expense for food or beverages shall
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131 STAT. 2125
not exceed 50 percent of the amount of such expense which
would (but for this paragraph) be allowable as a deduction
under this chapter.’’.
(E) Section 274(n)(2) is amended—
(i) in subparagraph (B), by striking ‘‘in the case
of an expense for food or beverages,’’,
(ii) by striking subparagraph (C) and redesignating
subparagraphs (D) and (E) as subparagraphs (C) and
(D), respectively,
(iii) by striking ‘‘of subparagraph (E)’’ the last sentence and inserting ‘‘of subparagraph (D)’’, and
(iv) by striking ‘‘in subparagraph (D)’’ in the last
sentence and inserting ‘‘in subparagraph (C)’’.
(F) Clause (iv) of section 7701(b)(5)(A) is amended to
read as follows:
‘‘(iv) a professional athlete who is temporarily in
the United States to compete in a sports event—
‘‘(I) which is organized for the primary purpose
of benefiting an organization which is described
in section 501(c)(3) and exempt from tax under
section 501(a),
‘‘(II) all of the net proceeds of which are
contributed to such organization, and,
‘‘(III) which utilizes volunteers for substantially all of the work performed in carrying out
such event.’’.
(b) ONLY 50 PERCENT OF EXPENSES FOR MEALS PROVIDED ON
OR NEAR BUSINESS PREMISES ALLOWED AS DEDUCTION.—Paragraph
(2) of section 274(n), as amended by subsection (a), is amended—
(1) by striking subparagraph (B),
(2) by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively,
(3) by striking ‘‘of subparagraph (D)’’ in the last sentence
and inserting ‘‘of subparagraph (C)’’, and
(4) by striking ‘‘in subparagraph (C)’’ in the last sentence
and inserting ‘‘in subparagraph (B)’’.
(c) TREATMENT OF TRANSPORTATION BENEFITS.—Section 274,
as amended by subsection (a), is amended—
(1) in subsection (a)—
(A) in the heading, by striking ‘‘OR RECREATION’’ and
inserting ‘‘RECREATION, OR QUALIFIED TRANSPORTATION
FRINGES’’, and
(B) by adding at the end the following new paragraph:
‘‘(4) QUALIFIED TRANSPORTATION FRINGES.—No deduction
shall be allowed under this chapter for the expense of any
qualified transportation fringe (as defined in section 132(f))
provided to an employee of the taxpayer.’’, and
(2) by inserting after subsection (k) the following new subsection:
‘‘(l) TRANSPORTATION AND COMMUTING BENEFITS.—
‘‘(1) IN GENERAL.—No deduction shall be allowed under
this chapter for any expense incurred for providing any
transportation, or any payment or reimbursement, to an
employee of the taxpayer in connection with travel between
the employee’s residence and place of employment, except as
necessary for ensuring the safety of the employee.
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26 USC 274.
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‘‘(2) EXCEPTION.—In the case of any qualified bicycle commuting reimbursement (as described in section 132(f)(5)(F)),
this subsection shall not apply for any amounts paid or incurred
after December 31, 2017, and before January 1, 2026.’’.
(d) ELIMINATION OF DEDUCTION FOR MEALS PROVIDED AT CONVENIENCE OF EMPLOYER.—Section 274, as amended by subsection
(c), is amended—
(1) by redesignating subsection (o) as subsection (p), and
(2) by inserting after subsection (n) the following new subsection:
‘‘(o) MEALS PROVIDED AT CONVENIENCE OF EMPLOYER.—No
deduction shall be allowed under this chapter for—
‘‘(1) any expense for the operation of a facility described
in section 132(e)(2), and any expense for food or beverages,
including under section 132(e)(1), associated with such facility,
or
‘‘(2) any expense for meals described in section 119(a).’’.
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts
incurred or paid after December 31, 2017.
(2) EFFECTIVE DATE FOR ELIMINATION OF DEDUCTION FOR
MEALS PROVIDED AT CONVENIENCE OF EMPLOYER.—The amendments made by subsection (d) shall apply to amounts incurred
or paid after December 31, 2025.
SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO
DOMESTIC PRODUCTION ACTIVITIES.
26 USC
prec. 161.
26 USC 74 note.
(a) IN GENERAL.—Part VI of subchapter B of chapter 1 is
amended by striking section 199 (and by striking the item relating
to such section in the table of sections for such part).
(b) CONFORMING AMENDMENTS.—
(1)
Sections
74(d)(2)(B),
86(b)(2)(A),
135(c)(4)(A),
137(b)(3)(A),
219(g)(3)(A)(ii),
221(b)(2)(C),
222(b)(2)(C),
246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking
‘‘199,’’.
(2) Section 170(b)(2)(D), as amended by subtitle A, is
amended by striking clause (iv), and by redesignating clauses
(v) and (vi) as clauses (iv) and (v).
(3) Section 172(d) is amended by striking paragraph (7).
(4) Section 613(a), as amended by section 11011, is
amended by striking ‘‘and without the deduction under section
199’’.
(5) Section 613A(d)(1), as amended by section 11011, is
amended by striking subparagraph (B) and by redesignating
subparagraphs (C), (D), (E), and (F) as subparagraphs (B),
(C), (D), and (E), respectively.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
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SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES,
AND OTHER AMOUNTS.
(a) DENIAL OF DEDUCTION.—
(1) IN GENERAL.—Subsection (f) of section 162 is amended
to read as follows:
‘‘(f) FINES, PENALTIES, AND OTHER AMOUNTS.—
‘‘(1) IN GENERAL.—Except as provided in the following paragraphs of this subsection, no deduction otherwise allowable
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2127
shall be allowed under this chapter for any amount paid or
incurred (whether by suit, agreement, or otherwise) to, or at
the direction of, a government or governmental entity in relation to the violation of any law or the investigation or inquiry
by such government or entity into the potential violation of
any law.
‘‘(2) EXCEPTION FOR AMOUNTS CONSTITUTING RESTITUTION
OR PAID TO COME INTO COMPLIANCE WITH LAW.—
‘‘(A) IN GENERAL.—Paragraph (1) shall not apply to
any amount that—
‘‘(i) the taxpayer establishes—
‘‘(I) constitutes restitution (including remediation of property) for damage or harm which was
or may be caused by the violation of any law
or the potential violation of any law, or
‘‘(II) is paid to come into compliance with any
law which was violated or otherwise involved in
the investigation or inquiry described in paragraph
(1),
‘‘(ii) is identified as restitution or as an amount
paid to come into compliance with such law, as the
case may be, in the court order or settlement agreement, and
‘‘(iii) in the case of any amount of restitution for
failure to pay any tax imposed under this title in
the same manner as if such amount were such tax,
would have been allowed as a deduction under this
chapter if it had been timely paid.
The identification under clause (ii) alone shall not be sufficient to make the establishment required under clause
(i).
‘‘(B) LIMITATION.—Subparagraph (A) shall not apply
to any amount paid or incurred as reimbursement to the
government or entity for the costs of any investigation
or litigation.
‘‘(3) EXCEPTION FOR AMOUNTS PAID OR INCURRED AS THE
RESULT OF CERTAIN COURT ORDERS.—Paragraph (1) shall not
apply to any amount paid or incurred by reason of any order
of a court in a suit in which no government or governmental
entity is a party.
‘‘(4) EXCEPTION FOR TAXES DUE.—Paragraph (1) shall not
apply to any amount paid or incurred as taxes due.
‘‘(5) TREATMENT OF CERTAIN NONGOVERNMENTAL REGULATORY ENTITIES.—For purposes of this subsection, the following nongovernmental entities shall be treated as governmental entities:
‘‘(A) Any nongovernmental entity which exercises selfregulatory powers (including imposing sanctions) in connection with a qualified board or exchange (as defined in
section 1256(g)(7)).
‘‘(B) To the extent provided in regulations, any nongovernmental entity which exercises self-regulatory powers
(including imposing sanctions) as part of performing an
essential governmental function.’’.
(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to amounts paid or incurred on or after
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26 USC 162 note.
PUBL097
131 STAT. 2128
PUBLIC LAW 115–97—DEC. 22, 2017
the date of the enactment of this Act, except that such amendments shall not apply to amounts paid or incurred under any
binding order or agreement entered into before such date. Such
exception shall not apply to an order or agreement requiring
court approval unless the approval was obtained before such
date.
(b) REPORTING OF DEDUCTIBLE AMOUNTS.—
(1) IN GENERAL.—Subpart B of part III of subchapter A
of chapter 61 is amended by inserting after section 6050W
the following new section:
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26 USC 6050X.
‘‘SEC. 6050X. INFORMATION WITH RESPECT TO CERTAIN FINES, PENALTIES, AND OTHER AMOUNTS.
IN
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‘‘(a) REQUIREMENT OF REPORTING.—
‘‘(1) IN GENERAL.—The appropriate official of any government or any entity described in section 162(f)(5) which is
involved in a suit or agreement described in paragraph (2)
shall make a return in such form as determined by the Secretary setting forth—
‘‘(A) the amount required to be paid as a result of
the suit or agreement to which paragraph (1) of section
162(f) applies,
‘‘(B) any amount required to be paid as a result of
the suit or agreement which constitutes restitution or
remediation of property, and
‘‘(C) any amount required to be paid as a result of
the suit or agreement for the purpose of coming into compliance with any law which was violated or involved in the
investigation or inquiry.
‘‘(2) SUIT OR AGREEMENT DESCRIBED.—
‘‘(A) IN GENERAL.—A suit or agreement is described
in this paragraph if—
‘‘(i) it is—
‘‘(I) a suit with respect to a violation of any
law over which the government or entity has
authority and with respect to which there has
been a court order, or
‘‘(II) an agreement which is entered into with
respect to a violation of any law over which the
government or entity has authority, or with respect
to an investigation or inquiry by the government
or entity into the potential violation of any law
over which such government or entity has
authority, and
‘‘(ii) the aggregate amount involved in all court
orders and agreements with respect to the violation,
investigation, or inquiry is $600 or more.
‘‘(B) ADJUSTMENT OF REPORTING THRESHOLD.—The Secretary shall adjust the $600 amount in subparagraph (A)(ii)
as necessary in order to ensure the efficient administration
of the internal revenue laws.
‘‘(3) TIME OF FILING.—The return required under this subsection shall be filed at the time the agreement is entered
into, as determined by the Secretary.
‘‘(b) STATEMENTS TO BE FURNISHED TO INDIVIDUALS INVOLVED
THE SETTLEMENT.—Every person required to make a return
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131 STAT. 2129
under subsection (a) shall furnish to each person who is a party
to the suit or agreement a written statement showing—
‘‘(1) the name of the government or entity, and
‘‘(2) the information supplied to the Secretary under subsection (a)(1).
The written statement required under the preceding sentence shall
be furnished to the person at the same time the government or
entity provides the Secretary with the information required under
subsection (a).
‘‘(c) APPROPRIATE OFFICIAL DEFINED.—For purposes of this section, the term ‘appropriate official’ means the officer or employee
having control of the suit, investigation, or inquiry or the person
appropriately designated for purposes of this section.’’.
(2) CONFORMING AMENDMENT.—The table of sections for
subpart B of part III of subchapter A of chapter 61 is amended
by inserting after the item relating to section 6050W the following new item:
26 USC
prec. 6041.
‘‘Sec. 6050X. Information with respect to certain fines, penalties, and other
amounts.’’.
(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to amounts paid or incurred on or after
the date of the enactment of this Act, except that such amendments shall not apply to amounts paid or incurred under any
binding order or agreement entered into before such date. Such
exception shall not apply to an order or agreement requiring
court approval unless the approval was obtained before such
date.
26 USC 6050X
note.
SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO
NONDISCLOSURE AGREEMENTS PAID IN CONNECTION
WITH SEXUAL HARASSMENT OR SEXUAL ABUSE.
(a) DENIAL OF DEDUCTION.—Section 162 is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection:
‘‘(q) PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL
ABUSE.—No deduction shall be allowed under this chapter for—
‘‘(1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject
to a nondisclosure agreement, or
‘‘(2) attorney’s fees related to such a settlement or payment.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act.
26 USC 162 note.
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SEC. 13308. REPEAL OF DEDUCTION FOR LOCAL LOBBYING EXPENSES.
(a) IN GENERAL.—Section 162(e) is amended by striking paragraphs (2) and (7) and by redesignating paragraphs (3), (4), (5),
(6), and (8) as paragraphs (2), (3), (4), (5), and (6), respectively.
(b) CONFORMING AMENDMENT.—Section 6033(e)(1)(B)(ii) is
amended by striking ‘‘section 162(e)(5)(B)(ii)’’ and inserting ‘‘section
162(e)(4)(B)(ii)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to amounts paid or incurred on or after the date of
the enactment of this Act.
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PUBLIC LAW 115–97—DEC. 22, 2017
SEC. 13309. RECHARACTERIZATION OF CERTAIN GAINS IN THE CASE
OF PARTNERSHIP PROFITS INTERESTS HELD IN
CONNECTION WITH PERFORMANCE OF INVESTMENT
SERVICES.
26 USC 1061,
1062.
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26 USC 1061.
(a) IN GENERAL.—Part IV of subchapter O of chapter 1 is
amended—
(1) by redesignating section 1061 as section 1062, and
(2) by inserting after section 1060 the following new section:
‘‘SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNECTION WITH
PERFORMANCE OF SERVICES.
‘‘(a) IN GENERAL.—If one or more applicable partnership
interests are held by a taxpayer at any time during the taxable
year, the excess (if any) of—
‘‘(1) the taxpayer’s net long-term capital gain with respect
to such interests for such taxable year, over
‘‘(2) the taxpayer’s net long-term capital gain with respect
to such interests for such taxable year computed by applying
paragraphs (3) and (4) of sections 1222 by substituting ‘3 years’
for ‘1 year’,
shall be treated as short-term capital gain, notwithstanding section
83 or any election in effect under section 83(b).
‘‘(b) SPECIAL RULE.—To the extent provided by the Secretary,
subsection (a) shall not apply to income or gain attributable to
any asset not held for portfolio investment on behalf of third party
investors.
‘‘(c) APPLICABLE PARTNERSHIP INTEREST.—For purposes of this
section—
‘‘(1) IN GENERAL.—Except as provided in this paragraph
or paragraph (4), the term ‘applicable partnership interest’
means any interest in a partnership which, directly or
indirectly, is transferred to (or is held by) the taxpayer in
connection with the performance of substantial services by the
taxpayer, or any other related person, in any applicable trade
or business. The previous sentence shall not apply to an interest
held by a person who is employed by another entity that is
conducting a trade or business (other than an applicable trade
or business) and only provides services to such other entity.
‘‘(2) APPLICABLE TRADE OR BUSINESS.—The term ‘applicable
trade or business’ means any activity conducted on a regular,
continuous, and substantial basis which, regardless of whether
the activity is conducted in one or more entities, consists,
in whole or in part, of—
‘‘(A) raising or returning capital, and
‘‘(B) either—
‘‘(i) investing in (or disposing of) specified assets
(or identifying specified assets for such investing or
disposition), or
‘‘(ii) developing specified assets.
‘‘(3) SPECIFIED ASSET.—The term ‘specified asset’ means
securities (as defined in section 475(c)(2) without regard to
the last sentence thereof), commodities (as defined in section
475(e)(2)), real estate held for rental or investment, cash or
cash equivalents, options or derivative contracts with respect
to any of the foregoing, and an interest in a partnership to
the extent of the partnership’s proportionate interest in any
of the foregoing.
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131 STAT. 2131
‘‘(4) EXCEPTIONS.—The term ‘applicable partnership
interest’ shall not include—
‘‘(A) any interest in a partnership directly or indirectly
held by a corporation, or
‘‘(B) any capital interest in the partnership which provides the taxpayer with a right to share in partnership
capital commensurate with—
‘‘(i) the amount of capital contributed (determined
at the time of receipt of such partnership interest),
or
‘‘(ii) the value of such interest subject to tax under
section 83 upon the receipt or vesting of such interest.
‘‘(5) THIRD PARTY INVESTOR.—The term ‘third party
investor’ means a person who—
‘‘(A) holds an interest in the partnership which does
not constitute property held in connection with an
applicable trade or business; and
‘‘(B) is not (and has not been) actively engaged, and
is (and was) not related to a person so engaged, in (directly
or indirectly) providing substantial services described in
paragraph (1) for such partnership or any applicable trade
or business.
‘‘(d) TRANSFER OF APPLICABLE PARTNERSHIP INTEREST TO
RELATED PERSON.—
‘‘(1) IN GENERAL.—If a taxpayer transfers any applicable
partnership interest, directly or indirectly, to a person related
to the taxpayer, the taxpayer shall include in gross income
(as short term capital gain) the excess (if any) of—
‘‘(A) so much of the taxpayer’s long-term capital gains
with respect to such interest for such taxable year attributable to the sale or exchange of any asset held for not
more than 3 years as is allocable to such interest, over
‘‘(B) any amount treated as short term capital gain
under subsection (a) with respect to the transfer of such
interest.
‘‘(2) RELATED PERSON.—For purposes of this paragraph,
a person is related to the taxpayer if—
‘‘(A) the person is a member of the taxpayer’s family
within the meaning of section 318(a)(1), or
‘‘(B) the person performed a service within the current
calendar year or the preceding three calendar years in
any applicable trade or business in which or for which
the taxpayer performed a service.
‘‘(e) REPORTING.—The Secretary shall require such reporting
(at the time and in the manner prescribed by the Secretary) as
is necessary to carry out the purposes of this section.
‘‘(f) REGULATIONS.—The Secretary shall issue such regulations
or other guidance as is necessary or appropriate to carry out the
purposes of this section’’.
(b) CLERICAL AMENDMENT.—The table of sections for part IV
of subchapter O of chapter 1 is amended by striking the item
relating to 1061 and inserting the following new items:
16 USC
prec. 1051.
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‘‘Sec. 1061. Partnership interests held in connection with performance of services.
‘‘Sec. 1062. Cross references.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
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26 USC 1061
note.
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131 STAT. 2132
PUBLIC LAW 115–97—DEC. 22, 2017
SEC. 13310. PROHIBITION ON CASH, GIFT CARDS, AND OTHER NONTANGIBLE
PERSONAL
PROPERTY
AS
EMPLOYEE
ACHIEVEMENT AWARDS.
26 USC 274.
26 USC 274 note.
(a) IN GENERAL.—Subparagraph (A) of section 274(j)(3) is
amended—
(1) by striking ‘‘The term’’ and inserting the following:
‘‘(i) IN GENERAL.—The term’’.
(2) by redesignating clauses (i), (ii), and (iii) as subclauses
(I), (II), and (III), respectively, and conforming the margins
accordingly, and
(3) by adding at the end the following new clause:
‘‘(ii) TANGIBLE PERSONAL PROPERTY.—For purposes
of clause (i), the term ‘tangible personal property’ shall
not include—
‘‘(I) cash, cash equivalents, gift cards, gift coupons, or gift certificates (other than arrangements
conferring only the right to select and receive tangible personal property from a limited array of
such items pre-selected or pre-approved by the
employer), or
‘‘(II) vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, other securities, and other similar items.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to amounts paid or incurred after December 31, 2017.
SEC. 13311. ELIMINATION OF DEDUCTION FOR LIVING EXPENSES
INCURRED BY MEMBERS OF CONGRESS.
26 USC 162 note.
(a) IN GENERAL.—Subsection (a) of section 162 is amended
in the matter following paragraph (3) by striking ‘‘in excess of
$3,000’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after the date of the enactment of this Act.
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SEC. 13312. CERTAIN CONTRIBUTIONS BY GOVERNMENTAL ENTITIES
NOT TREATED AS CONTRIBUTIONS TO CAPITAL.
26 USC 118 note.
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(a) IN GENERAL.—Section 118 is amended—
(1) by striking subsections (b), (c), and (d),
(2) by redesignating subsection (e) as subsection (d), and
(3) by inserting after subsection (a) the following new subsections:
‘‘(b) EXCEPTIONS.—For purposes of subsection (a), the term ‘contribution to the capital of the taxpayer’ does not include—
‘‘(1) any contribution in aid of construction or any other
contribution as a customer or potential customer, and
‘‘(2) any contribution by any governmental entity or civic
group (other than a contribution made by a shareholder as
such).
‘‘(c) REGULATIONS.—The Secretary shall issue such regulations
or other guidance as may be necessary or appropriate to carry
out this section, including regulations or other guidance for determining whether any contribution constitutes a contribution in aid
of construction.’’.
(b) EFFECTIVE DATE.—
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131 STAT. 2133
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to contributions
made after the date of enactment of this Act.
(2) EXCEPTION.—The amendments made by this section
shall not apply to any contribution, made after the date of
enactment of this Act by a governmental entity, which is made
pursuant to a master development plan that has been approved
prior to such date by a governmental entity.
SEC. 13313. REPEAL OF ROLLOVER OF PUBLICLY TRADED SECURITIES
GAIN INTO SPECIALIZED SMALL BUSINESS INVESTMENT
COMPANIES.
(a) IN GENERAL.—Part III of subchapter O of chapter 1 is
amended by striking section 1044 (and by striking the item relating
to such section in the table of sections of such part).
(b) CONFORMING AMENDMENTS.—Section 1016(a)(23) is
amended—
(1) by striking ‘‘1044,’’, and
(2) by striking ‘‘1044(d),’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to sales after December 31, 2017.
26 USC
prec. 1031.
26 USC 1016
note.
SEC. 13314. CERTAIN SELF-CREATED PROPERTY NOT TREATED AS A
CAPITAL ASSET.
(a) PATENTS, ETC.—Section 1221(a)(3) is amended by inserting
‘‘a patent, invention, model or design (whether or not patented),
a secret formula or process,’’ before ‘‘a copyright’’.
(b) CONFORMING AMENDMENT.—Section 1231(b)(1)(C) is
amended by inserting ‘‘a patent, invention, model or design (whether
or not patented), a secret formula or process,’’ before ‘‘a copyright’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to dispositions after December 31, 2017.
26 USC 1221
note.
PART V—BUSINESS CREDITS
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SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT.
(a) CREDIT RATE.—Subsection (a) of section 45C is amended
by striking ‘‘50 percent’’ and inserting ‘‘25 percent’’.
(b) ELECTION OF REDUCED CREDIT.—Subsection (b) of section
280C is amended by redesignating paragraph (3) as paragraph
(4) and by inserting after paragraph (2) the following new paragraph:
‘‘(3) ELECTION OF REDUCED CREDIT.—
‘‘(A) IN GENERAL.—In the case of any taxable year
for which an election is made under this paragraph—
‘‘(i) paragraphs (1) and (2) shall not apply, and
‘‘(ii) the amount of the credit under section 45C(a)
shall be the amount determined under subparagraph
(B).
‘‘(B) AMOUNT OF REDUCED CREDIT.—The amount of
credit determined under this subparagraph for any taxable
year shall be the amount equal to the excess of—
‘‘(i) the amount of credit determined under section
45C(a) without regard to this paragraph, over
‘‘(ii) the product of—
‘‘(I) the amount described in clause (i), and
‘‘(II) the maximum rate of tax under section
11(b).
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131 STAT. 2134
26 USC 45C note.
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(C) ELECTION.—An election under this paragraph for
any taxable year shall be made not later than the time
for filing the return of tax for such year (including extensions), shall be made on such return, and shall be made
in such manner as the Secretary shall prescribe. Such
an election, once made, shall be irrevocable.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
SEC. 13402. REHABILITATION CREDIT LIMITED TO CERTIFIED HISTORIC STRUCTURES.
26 USC 47.
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26 USC 47 note.
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(a) IN GENERAL.—Subsection (a) of section 47 is amended to
read as follows:
‘‘(a) GENERAL RULE.—
‘‘(1) IN GENERAL.—For purposes of section 46, for any taxable year during the 5-year period beginning in the taxable
year in which a qualified rehabilitated building is placed in
service, the rehabilitation credit for such year is an amount
equal to the ratable share for such year.
‘‘(2) RATABLE SHARE.—For purposes of paragraph (1), the
ratable share for any taxable year during the period described
in such paragraph is the amount equal to 20 percent of the
qualified rehabilitation expenditures with respect to the qualified rehabilitated building, as allocated ratably to each year
during such period.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 47(c) is amended—
(A) in paragraph (1)—
(i) in subparagraph (A), by amending clause (iii)
to read as follows:
‘‘(iii) such building is a certified historic structure,
and’’,
(ii) by striking subparagraph (B), and
(iii) by redesignating subparagraphs (C) and (D)
as subparagraphs (B) and (C), respectively, and
(B) in paragraph (2)(B), by amending clause (iv) to
read as follows:
‘‘(iv)
CERTIFIED
HISTORIC
STRUCTURE.—Any
expenditure attributable to the rehabilitation of a
qualified rehabilitated building unless the rehabilitation is a certified rehabilitation (within the meaning
of subparagraph (C)).’’.
(2) Paragraph (4) of section 145(d) is amended—
(A) by striking ‘‘of section 47(c)(1)(C)’’ each place it
appears and inserting ‘‘of section 47(c)(1)(B)’’, and
(B) by striking ‘‘section 47(c)(1)(C)(i)’’ and inserting
‘‘section 47(c)(1)(B)(i)’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts paid
or incurred after December 31, 2017.
(2) TRANSITION RULE.—In the case of qualified rehabilitation expenditures with respect to any building—
(A) owned or leased by the taxpayer during the entirety
of the period after December 31, 2017, and
(B) with respect to which the 24-month period selected
by the taxpayer under clause (i) of section 47(c)(1)(B) of
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131 STAT. 2135
the Internal Revenue Code (as amended by subsection (b)),
or the 60-month period applicable under clause (ii) of such
section, begins not later than 180 days after the date
of the enactment of this Act,
the amendments made by this section shall apply to such
expenditures paid or incurred after the end of the taxable
year in which the 24-month period, or the 60-month period,
referred to in subparagraph (B) ends.
SEC. 13403. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL
LEAVE.
(a) IN GENERAL.—
(1) ALLOWANCE OF CREDIT.—Subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the
following new section:
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‘‘SEC. 45S. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE.
26 USC 45S.
‘‘(a) ESTABLISHMENT OF CREDIT.—
‘‘(1) IN GENERAL.—For purposes of section 38, in the case
of an eligible employer, the paid family and medical leave
credit is an amount equal to the applicable percentage of the
amount of wages paid to qualifying employees during any period
in which such employees are on family and medical leave.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes of paragraph
(1), the term ‘applicable percentage’ means 12.5 percent
increased (but not above 25 percent) by 0.25 percentage points
for each percentage point by which the rate of payment (as
described under subsection (c)(1)(B)) exceeds 50 percent.
‘‘(b) LIMITATION.—
‘‘(1) IN GENERAL.—The credit allowed under subsection (a)
with respect to any employee for any taxable year shall not
exceed an amount equal to the product of the normal hourly
wage rate of such employee for each hour (or fraction thereof)
of actual services performed for the employer and the number
of hours (or fraction thereof) for which family and medical
leave is taken.
‘‘(2) NON-HOURLY WAGE RATE.—For purposes of paragraph
(1), in the case of any employee who is not paid on an hourly
wage rate, the wages of such employee shall be prorated to
an hourly wage rate under regulations established by the Secretary.
‘‘(3) MAXIMUM AMOUNT OF LEAVE SUBJECT TO CREDIT.—
The amount of family and medical leave that may be taken
into account with respect to any employee under subsection
(a) for any taxable year shall not exceed 12 weeks.
‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘eligible employer’ means any
employer who has in place a written policy that meets the
following requirements:
‘‘(A) The policy provides—
‘‘(i) in the case of a qualifying employee who is
not a part-time employee (as defined in section
4980E(d)(4)(B)), not less than 2 weeks of annual paid
family and medical leave, and
‘‘(ii) in the case of a qualifying employee who is
a part-time employee, an amount of annual paid family
and medical leave that is not less than an amount
which bears the same ratio to the amount of annual
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131 STAT. 2136
PUBLIC LAW 115–97—DEC. 22, 2017
paid family and medical leave that is provided to a
qualifying employee described in clause (i) as—
‘‘(I) the number of hours the employee is
expected to work during any week, bears to
‘‘(II) the number of hours an equivalent qualifying employee described in clause (i) is expected
to work during the week.
‘‘(B) The policy requires that the rate of payment under
the program is not less than 50 percent of the wages
normally paid to such employee for services performed
for the employer.
‘‘(2) SPECIAL RULE FOR CERTAIN EMPLOYERS.—
‘‘(A) IN GENERAL.—An added employer shall not be
treated as an eligible employer unless such employer provides paid family and medical leave in compliance with
a written policy which ensures that the employer—
‘‘(i) will not interfere with, restrain, or deny the
exercise of or the attempt to exercise, any right provided under the policy, and
‘‘(ii) will not discharge or in any other manner
discriminate against any individual for opposing any
practice prohibited by the policy.
‘‘(B) ADDED EMPLOYER; ADDED EMPLOYEE.—For purposes of this paragraph—
‘‘(i) ADDED EMPLOYEE.—The term ‘added employee’
means a qualifying employee who is not covered by
title I of the Family and Medical Leave Act of 1993,
as amended.
‘‘(ii) ADDED EMPLOYER.—The term ‘added employer’
means an eligible employer (determined without regard
to this paragraph), whether or not covered by that
title I, who offers paid family and medical leave to
added employees.
‘‘(3) AGGREGATION RULE.—All persons which are treated
as a single employer under subsections (a) and (b) of section
52 shall be treated as a single taxpayer.
‘‘(4) TREATMENT OF BENEFITS MANDATED OR PAID FOR BY
STATE OR LOCAL GOVERNMENTS.—For purposes of this section,
any leave which is paid by a State or local government or
required by State or local law shall not be taken into account
in determining the amount of paid family and medical leave
provided by the employer.
‘‘(5) NO INFERENCE.—Nothing in this subsection shall be
construed as subjecting an employer to any penalty, liability,
or other consequence (other than ineligibility for the credit
allowed by reason of subsection (a) or recapturing the benefit
of such credit) for failure to comply with the requirements
of this subsection.
‘‘(d) QUALIFYING EMPLOYEES.—For purposes of this section, the
term ‘qualifying employee’ means any employee (as defined in section 3(e) of the Fair Labor Standards Act of 1938, as amended)
who—
‘‘(1) has been employed by the employer for 1 year or
more, and
‘‘(2) for the preceding year, had compensation not in excess
of an amount equal to 60 percent of the amount applicable
for such year under clause (i) of section 414(q)(1)(B).
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2137
‘‘(e) FAMILY AND MEDICAL LEAVE.—
‘‘(1) IN GENERAL.—Except as provided in paragraph (2),
for purposes of this section, the term ‘family and medical leave’
means leave for any 1 or more of the purposes described under
subparagraph (A), (B), (C), (D), or (E) of paragraph (1), or
paragraph (3), of section 102(a) of the Family and Medical
Leave Act of 1993, as amended, whether the leave is provided
under that Act or by a policy of the employer.
‘‘(2) EXCLUSION.—If an employer provides paid leave as
vacation leave, personal leave, or medical or sick leave (other
than leave specifically for 1 or more of the purposes referred
to in paragraph (1)), that paid leave shall not be considered
to be family and medical leave under paragraph (1).
‘‘(3) DEFINITIONS.—In this subsection, the terms ‘vacation
leave’, ‘personal leave’, and ‘medical or sick leave’ mean those
3 types of leave, within the meaning of section 102(d)(2) of
that Act.
‘‘(f) DETERMINATIONS MADE BY SECRETARY OF TREASURY.—For
purposes of this section, any determination as to whether an
employer or an employee satisfies the applicable requirements for
an eligible employer (as described in subsection (c)) or qualifying
employee (as described in subsection (d)), respectively, shall be
made by the Secretary based on such information, to be provided
by the employer, as the Secretary determines to be necessary or
appropriate.
‘‘(g) WAGES.—For purposes of this section, the term ‘wages’
has the meaning given such term by subsection (b) of section
3306 (determined without regard to any dollar limitation contained
in such section). Such term shall not include any amount taken
into account for purposes of determining any other credit allowed
under this subpart.
‘‘(h) ELECTION TO HAVE CREDIT NOT APPLY.—
‘‘(1) IN GENERAL.—A taxpayer may elect to have this section
not apply for any taxable year.
‘‘(2) OTHER RULES.—Rules similar to the rules of paragraphs (2) and (3) of section 51(j) shall apply for purposes
of this subsection.
‘‘(i) TERMINATION.—This section shall not apply to wages paid
in taxable years beginning after December 31, 2019.’’.
(b) CREDIT PART OF GENERAL BUSINESS CREDIT.—Section 38(b)
is amended by striking ‘‘plus’’ at the end of paragraph (35), by
striking the period at the end of paragraph (36) and inserting
‘‘, plus’’, and by adding at the end the following new paragraph:
‘‘(37) in the case of an eligible employer (as defined in
section 45S(c)), the paid family and medical leave credit determined under section 45S(a).’’.
(c) CREDIT ALLOWED AGAINST AMT.—Subparagraph (B) of section 38(c)(4) is amended by redesignating clauses (ix) through (xi)
as clauses (x) through (xii), respectively, and by inserting after
clause (viii) the following new clause:
‘‘(ix) the credit determined under section 45S,’’.
(d) CONFORMING AMENDMENTS.—
(1) DENIAL OF DOUBLE BENEFIT.—Section 280C(a) is
amended by inserting ‘‘45S(a),’’ after ‘‘45P(a),’’.
(2) ELECTION TO HAVE CREDIT NOT APPLY.—Section 6501(m)
is amended by inserting ‘‘45S(h),’’ after ‘‘45H(g),’’.
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26 USC 38.
PUBL097
131 STAT. 2138
PUBLIC LAW 115–97—DEC. 22, 2017
(3) CLERICAL AMENDMENT.—The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended
by adding at the end the following new item:
26 USC prec. 38.
‘‘Sec. 45S. Employer credit for paid family and medical leave.’’.
26 USC 38 note.
(e) EFFECTIVE DATE.—The amendments made by this section
shall apply to wages paid in taxable years beginning after December
31, 2017.
SEC. 13404. REPEAL OF TAX CREDIT BONDS.
26 USC prec. 21,
prec. 54, 54,
prec. 54A,
54A–54F,
prec. 54AA,
54AA.
26 USC
prec. 6411.
26 USC
prec. 1397E.
26 USC 54 note.
(a) IN GENERAL.—Part IV of subchapter A of chapter 1 is
amended by striking subparts H, I, and J (and by striking the
items relating to such subparts in the table of subparts for such
part).
(b) PAYMENTS TO ISSUERS.—Subchapter B of chapter 65 is
amended by striking section 6431 (and by striking the item relating
to such section in the table of sections for such subchapter).
(c) CONFORMING AMENDMENTS.—
(1) Part IV of subchapter U of chapter 1 is amended by
striking section 1397E (and by striking the item relating to
such section in the table of sections for such part).
(2) Section 54(l)(3)(B) is amended by inserting ‘‘(as in effect
before its repeal by the Tax Cuts and Jobs Act)’’ after ‘‘section
1397E(I)’’.
(3) Section 6211(b)(4)(A) is amended by striking ‘‘, and
6431’’ and inserting ‘‘and’’ before ‘‘36B’’.
(4) Section 6401(b)(1) is amended by striking ‘‘G, H, I,
and J’’ and inserting ‘‘and G’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to bonds issued after December 31, 2017.
PART VI—PROVISIONS RELATED TO SPECIFIC
ENTITIES AND INDUSTRIES
Subpart A—Partnership Provisions
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SEC. 13501. TREATMENT OF GAIN OR LOSS OF FOREIGN PERSONS
FROM SALE OR EXCHANGE OF INTERESTS IN PARTNERSHIPS ENGAGED IN TRADE OR BUSINESS WITHIN THE
UNITED STATES.
(a) AMOUNT TREATED AS EFFECTIVELY CONNECTED.—
(1) IN GENERAL.—Section 864(c) is amended by adding at
the end the following:
‘‘(8) GAIN OR LOSS OF FOREIGN PERSONS FROM SALE OR
EXCHANGE OF CERTAIN PARTNERSHIP INTERESTS.—
‘‘(A) IN GENERAL.—Notwithstanding any other provision of this subtitle, if a nonresident alien individual or
foreign corporation owns, directly or indirectly, an interest
in a partnership which is engaged in any trade or business
within the United States, gain or loss on the sale or
exchange of all (or any portion of) such interest shall be
treated as effectively connected with the conduct of such
trade or business to the extent such gain or loss does
not exceed the amount determined under subparagraph
(B).
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2139
‘‘(B) AMOUNT TREATED AS EFFECTIVELY CONNECTED.—
The amount determined under this subparagraph with
respect to any partnership interest sold or exchanged—
‘‘(i) in the case of any gain on the sale or exchange
of the partnership interest, is—
‘‘(I) the portion of the partner’s distributive
share of the amount of gain which would have
been effectively connected with the conduct of a
trade or business within the United States if the
partnership had sold all of its assets at their fair
market value as of the date of the sale or exchange
of such interest, or
‘‘(II) zero if no gain on such deemed sale would
have been so effectively connected, and
‘‘(ii) in the case of any loss on the sale or exchange
of the partnership interest, is—
‘‘(I) the portion of the partner’s distributive
share of the amount of loss on the deemed sale
described in clause (i)(I) which would have been
so effectively connected, or
‘‘(II) zero if no loss on such deemed sale would
be have been so effectively connected.
For purposes of this subparagraph, a partner’s distributive share of gain or loss on the deemed sale shall
be determined in the same manner as such partner’s
distributive share of the non-separately stated taxable
income or loss of such partnership.
‘‘(C) COORDINATION WITH UNITED STATES REAL PROPERTY INTERESTS.—If a partnership described in subparagraph (A) holds any United States real property interest
(as defined in section 897(c)) at the time of the sale or
exchange of the partnership interest, then the gain or
loss treated as effectively connected income under subparagraph (A) shall be reduced by the amount so treated with
respect to such United States real property interest under
section 897.
‘‘(D) SALE OR EXCHANGE.—For purposes of this paragraph, the term ‘sale or exchange’ means any sale,
exchange, or other disposition.
‘‘(E) SECRETARIAL AUTHORITY.—The Secretary shall
prescribe such regulations or other guidance as the Secretary determines appropriate for the application of this
paragraph, including with respect to exchanges described
in section 332, 351, 354, 355, 356, or 361.’’.
(2) CONFORMING AMENDMENTS.—Section 864(c)(1) is
amended—
(A) by striking ‘‘and (7)’’ in subparagraph (A), and
inserting ‘‘(7), and (8)’’, and
(B) by striking ‘‘or (7)’’ in subparagraph (B), and
inserting ‘‘(7), or (8)’’.
(b) WITHHOLDING REQUIREMENTS.—Section 1446 is amended
by redesignating subsection (f) as subsection (g) and by inserting
after subsection (e) the following:
‘‘(f) SPECIAL RULES FOR WITHHOLDING ON DISPOSITIONS OF
PARTNERSHIP INTERESTS.—
‘‘(1) IN GENERAL.—Except as provided in this subsection,
if any portion of the gain (if any) on any disposition of an
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26 USC 864.
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131 STAT. 2140
PUBLIC LAW 115–97—DEC. 22, 2017
interest in a partnership would be treated under section
864(c)(8) as effectively connected with the conduct of a trade
or business within the United States, the transferee shall be
required to deduct and withhold a tax equal to 10 percent
of the amount realized on the disposition.
‘‘(2) EXCEPTION IF NONFOREIGN AFFIDAVIT FURNISHED.—
‘‘(A) IN GENERAL.—No person shall be required to
deduct and withhold any amount under paragraph (1) with
respect to any disposition if the transferor furnishes to
the transferee an affidavit by the transferor stating, under
penalty of perjury, the transferor’s United States taxpayer
identification number and that the transferor is not a foreign person.
‘‘(B) FALSE AFFIDAVIT.—Subparagraph (A) shall not
apply to any disposition if—
‘‘(i) the transferee has actual knowledge that the
affidavit is false, or the transferee receives a notice
(as described in section 1445(d)) from a transferor’s
agent or transferee’s agent that such affidavit or statement is false, or
‘‘(ii) the Secretary by regulations requires the
transferee to furnish a copy of such affidavit or statement to the Secretary and the transferee fails to furnish a copy of such affidavit or statement to the Secretary at such time and in such manner as required
by such regulations.
‘‘(C) RULES FOR AGENTS.—The rules of section 1445(d)
shall apply to a transferor’s agent or transferee’s agent
with respect to any affidavit described in subparagraph
(A) in the same manner as such rules apply with respect
to the disposition of a United States real property interest
under such section.
‘‘(3) AUTHORITY OF SECRETARY TO PRESCRIBE REDUCED
AMOUNT.—At the request of the transferor or transferee, the
Secretary may prescribe a reduced amount to be withheld under
this section if the Secretary determines that to substitute such
reduced amount will not jeopardize the collection of the tax
imposed under this title with respect to gain treated under
section 864(c)(8) as effectively connected with the conduct of
a trade or business with in the United States.
‘‘(4) PARTNERSHIP TO WITHHOLD AMOUNTS NOT WITHHELD
BY THE TRANSFEREE.—If a transferee fails to withhold any
amount required to be withheld under paragraph (1), the partnership shall be required to deduct and withhold from distributions to the transferee a tax in an amount equal to the amount
the transferee failed to withhold (plus interest under this title
on such amount).
‘‘(5) DEFINITIONS.—Any term used in this subsection which
is also used under section 1445 shall have the same meaning
as when used in such section.
‘‘(6) REGULATIONS.—The Secretary shall prescribe such
regulations or other guidance as may be necessary to carry
out the purposes of this subsection, including regulations providing for exceptions from the provisions of this subsection.’’.
(c) EFFECTIVE DATES.—
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2141
(1) SUBSECTION (a).—The amendments made by subsection
(a) shall apply to sales, exchanges, and dispositions on or after
November 27, 2017.
(2) SUBSECTION (b).—The amendment made by subsection
(b) shall apply to sales, exchanges, and dispositions after
December 31, 2017.
26 USC 864 note.
26 USC 1446
note.
SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN LOSS IN
THE CASE OF TRANSFER OF PARTNERSHIP INTEREST.
(a) IN GENERAL.—Paragraph (1) of section 743(d) is to read
as follows:
‘‘(1) IN GENERAL.—For purposes of this section, a partnership has a substantial built-in loss with respect to a transfer
of an interest in the partnership if—
‘‘(A) the partnership’s adjusted basis in the partnership
property exceeds by more than $250,000 the fair market
value of such property, or
‘‘(B) the transferee partner would be allocated a loss
of more than $250,000 if the partnership assets were sold
for cash equal to their fair market value immediately after
such transfer.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to transfers of partnership interests after December
31, 2017.
26 USC 743.
26 USC 743 note.
SEC. 13503. CHARITABLE CONTRIBUTIONS AND FOREIGN TAXES TAKEN
INTO ACCOUNT IN DETERMINING LIMITATION ON
ALLOWANCE OF PARTNER’S SHARE OF LOSS.
(a) IN GENERAL.—Subsection (d) of section 704 is amended—
(1) by striking ‘‘A partner’s distributive share’’ and inserting
the following:
‘‘(1) IN GENERAL.—A partner’s distributive share’’,
(2) by striking ‘‘Any excess of such loss’’ and inserting
the following:
‘‘(2) CARRYOVER.—Any excess of such loss’’, and
(3) by adding at the end the following new paragraph:
‘‘(3) SPECIAL RULES.—
‘‘(A) IN GENERAL.—In determining the amount of any
loss under paragraph (1), there shall be taken into account
the partner’s distributive share of amounts described in
paragraphs (4) and (6) of section 702(a).
‘‘(B) EXCEPTION.—In the case of a charitable contribution of property whose fair market value exceeds its
adjusted basis, subparagraph (A) shall not apply to the
extent of the partner’s distributive share of such excess.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to partnership taxable years beginning after December
31, 2017.
26 USC 704 note.
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SEC. 13504. REPEAL OF TECHNICAL TERMINATION OF PARTNERSHIPS.
(a) IN GENERAL.—Paragraph (1) of section 708(b) is amended—
(1) by striking ‘‘, or’’ at the end of subparagraph (A) and
all that follows and inserting a period, and
(2) by striking ‘‘only if—’’ and all that follows through
‘‘no part of any business’’ and inserting the following: ‘‘only
if no part of any business’’.
(b) CONFORMING AMENDMENT.—
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131 STAT. 2142
26 USC 168.
26 USC 168 note.
PUBLIC LAW 115–97—DEC. 22, 2017
(1) Section 168(i)(7)(B) is amended by striking the second
sentence.
(2) Section 743(e) is amended by striking paragraph (4)
and redesignating paragraphs (5), (6), and (7) as paragraphs
(4), (5), and (6).
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to partnership taxable years beginning after December
31, 2017.
Subpart B—Insurance Reforms
SEC. 13511. NET OPERATING LOSSES OF LIFE INSURANCE COMPANIES.
26 USC
prec. 804.
26 USC
prec. 841.
26 USC 381 note.
(a) IN GENERAL.—Section 805(b) is amended by striking paragraph (4) and by redesignating paragraph (5) as paragraph (4).
(b) CONFORMING AMENDMENTS.—
(1) Part I of subchapter L of chapter 1 is amended by
striking section 810 (and by striking the item relating to such
section in the table of sections for such part).
(2)(A) Part III of subchapter L of chapter 1 is amended
by striking section 844 (and by striking the item relating to
such section in the table of sections for such part).
(B) Section 831(b)(3) is amended by striking ‘‘except as
provided in section 844,’’
(3) Section 381 is amended by striking subsection (d).
(4) Section 805(a)(4)(B)(ii) is amended to read as follows:
‘‘(ii) the deduction allowed under section 172,’’.
(5) Section 805(a) is amended by striking paragraph (5).
(6) Section 805(b)(2)(A)(iv) is amended to read as follows:
‘‘(iv) any net operating loss carryback to the taxable year under section 172, and’’.
(7) Section 953(b)(1)(B) is amended to read as follows:
‘‘(B) So much of section 805(a)(8) as relates to the
deduction allowed under section 172.’’.
(8) Section 1351(i)(3) is amended by striking ‘‘or the operations loss deduction under section 810,’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to losses arising in taxable years beginning after
December 31, 2017.
SEC. 13512. REPEAL OF SMALL LIFE INSURANCE COMPANY DEDUCTION.
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26 USC
prec. 804.
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(a) IN GENERAL.—Part I of subchapter L of chapter 1 is
amended by striking section 806 (and by striking the item relating
to such section in the table of sections for such part).
(b) CONFORMING AMENDMENTS.—
(1) Section 453B(e) is amended—
(A) by striking ‘‘(as defined in section 806(b)(3))’’ in
paragraph (2)(B), and
(B) by adding at the end the following new paragraph:
‘‘(3) NONINSURANCE BUSINESS.—
‘‘(A) IN GENERAL.—For purposes of this subsection, the
term ‘noninsurance business’ means any activity which
is not an insurance business.
‘‘(B) CERTAIN ACTIVITIES TREATED AS INSURANCE
BUSINESSES.—For purposes of subparagraph (A), any
activity which is not an insurance business shall be treated
as an insurance business if—
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2143
‘‘(i) it is of a type traditionally carried on by life
insurance companies for investment purposes, but only
if the carrying on of such activity (other than in the
case of real estate) does not constitute the active conduct of a trade or business, or
‘‘(ii) it involves the performance of administrative
services in connection with plans providing life insurance, pension, or accident and health benefits.’’.
(2) Section 465(c)(7)(D)(v)(II) is amended by striking ‘‘section 806(b)(3)’’ and inserting ‘‘section 453B(e)(3)’’.
(3) Section 801(a)(2) is amended by striking subparagraph
(C).
(4) Section 804 is amended by striking ‘‘means—’’ and
all that follows and inserting ‘‘means the general deductions
provided in section 805.’’.
(5) Section 805(a)(4)(B), as amended by this Act, is amended
by striking clause (i) and by redesignating clauses (ii), (iii),
and (iv) as clauses (i), (ii), and (iii), respectively.
(6) Section 805(b)(2)(A), as amended by this Act, is amended
by striking clause (iii) and by redesignating clauses (iv) and
(v) as clauses (iii) and (iv), respectively.
(7) Section 842(c) is amended by striking paragraph (1)
and by redesignating paragraphs (2) and (3) as paragraphs
(1) and (2), respectively.
(8) Section 953(b)(1), as amended by section 13511, is
amended by striking subparagraph (A) and by redesignating
subparagraphs (B) and (C) as subparagraphs (A) and (B),
respectively.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 465.
26 USC 453B
note.
SEC. 13513. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES.
(a) IN GENERAL.—Paragraph (1) of section 807(f) is amended
to read as follows:
‘‘(1) TREATMENT AS CHANGE IN METHOD OF ACCOUNTING.—
If the basis for determining any item referred to in subsection
(c) as of the close of any taxable year differs from the basis
for such determination as of the close of the preceding taxable
year, then so much of the difference between—
‘‘(A) the amount of the item at the close of the taxable
year, computed on the new basis, and
‘‘(B) the amount of the item at the close of the taxable
year, computed on the old basis,
as is attributable to contracts issued before the taxable year
shall be taken into account under section 481 as adjustments
attributable to a change in method of accounting initiated by
the taxpayer and made with the consent of the Secretary.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 807 note.
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SEC. 13514. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO SHAREHOLDERS FROM PRE-1984 POLICYHOLDERS SURPLUS
ACCOUNT.
(a) IN GENERAL.—Subpart D of part I of subchapter L is
amended by striking section 815 (and by striking the item relating
to such section in the table of sections for such subpart).
(b) CONFORMING AMENDMENT.—Section 801 is amended by
striking subsection (c).
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26 USC
prec. 811.
PUBL097
131 STAT. 2144
26 USC 801 note.
26 USC 801 note.
PUBLIC LAW 115–97—DEC. 22, 2017
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
(d) PHASED INCLUSION OF REMAINING BALANCE OF POLICYHOLDERS SURPLUS ACCOUNTS.—In the case of any stock life insurance company which has a balance (determined as of the close
of such company’s last taxable year beginning before January 1,
2018) in an existing policyholders surplus account (as defined in
section 815 of the Internal Revenue Code of 1986, as in effect
before its repeal), the tax imposed by section 801 of such Code
for the first 8 taxable years beginning after December 31, 2017,
shall be the amount which would be imposed by such section
for such year on the sum of—
(1) life insurance company taxable income for such year
(within the meaning of such section 801 but not less than
zero), plus
(2) 1⁄8 of such balance.
SEC. 13515. MODIFICATION OF PRORATION RULES FOR PROPERTY AND
CASUALTY INSURANCE COMPANIES.
26 USC 832 note.
(a) IN GENERAL.—Section 832(b)(5)(B) is amended—
(1) by striking ‘‘15 percent’’ and inserting ‘‘the applicable
percentage’’, and
(2) by inserting at the end the following new sentence:
‘‘For purposes of this subparagraph, the applicable percentage
is 5.25 percent divided by the highest rate in effect under
section 11(b).’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.
26 USC
prec. 841.
26 USC 847 note.
(a) IN GENERAL.—Part III of subchapter L of chapter 1 is
amended by striking section 847 (and by striking the item relating
to such section in the table of sections for such part).
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
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SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RESERVES.
(a) IN GENERAL.—
(1) APPROPRIATE RATE OF INTEREST.—The second sentence
of section 807(c) is amended to read as follows: ‘‘For purposes
of paragraph (3), the appropriate rate of interest is the highest
rate or rates permitted to be used to discount the obligations
by the National Association of Insurance Commissioners as
of the date the reserve is determined.’’.
(2) METHOD OF COMPUTING RESERVES.—Section 807(d) is
amended—
(A) by striking paragraphs (1), (2), (4), and (5),
(B) by redesignating paragraph (6) as paragraph (4),
(C) by inserting before paragraph (3) the following
new paragraphs:
‘‘(1) DETERMINATION OF RESERVE.—
‘‘(A) IN GENERAL.—For purposes of this part (other
than section 816), the amount of the life insurance reserves
for any contract (other than a contract to which subparagraph (B) applies) shall be the greater of—
‘‘(i) the net surrender value of such contract, or
‘‘(ii) 92.81 percent of the reserve determined under
paragraph (2).
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131 STAT. 2145
‘‘(B) VARIABLE CONTRACTS.—For purposes of this part
(other than section 816), the amount of the life insurance
reserves for a variable contract shall be equal to the sum
of—
‘‘(i) the greater of—
‘‘(I) the net surrender value of such contract,
or
‘‘(II) the portion of the reserve that is separately accounted for under section 817, plus
‘‘(ii) 92.81 percent of the excess (if any) of the
reserve determined under paragraph (2) over the
amount in clause (i).
‘‘(C) STATUTORY CAP.—In no event shall the reserves
determined under subparagraphs (A) or (B) for any contract
as of any time exceed the amount which would be taken
into account with respect to such contract as of such time
in determining statutory reserves (as defined in paragraph
(4)).
‘‘(D) NO DOUBLE COUNTING.—In no event shall any
amount or item be taken into account more than once
in determining any reserve under this subchapter.
‘‘(2) AMOUNT OF RESERVE.—The amount of the reserve
determined under this paragraph with respect to any contract
shall be determined by using the tax reserve method applicable
to such contract.’’.
(D) by striking ‘‘(other than a qualified long-term care
insurance contract, as defined in section 7702B(b)), a 2year full preliminary term method’’ in paragraph (3)(A)(iii)
and inserting ‘‘, the reserve method prescribed by the
National Association of Insurance Commissioners which
covers such contract as of the date the reserve is determined’’,
(E) by striking ‘‘(as of the date of issuance)’’ in paragraph (3)(A)(iv)(I) and inserting ‘‘(as of the date the reserve
is determined)’’,
(F) by striking ‘‘as of the date of the issuance of’’
in paragraph (3)(A)(iv)(II) and inserting ‘‘as of the date
the reserve is determined for’’,
(G) by striking ‘‘in effect on the date of the issuance
of the contract’’ in paragraph (3)(B)(i) and inserting
‘‘applicable to the contract and in effect as of the date
the reserve is determined’’, and
(H) by striking ‘‘in effect on the date of the issuance
of the contract’’ in paragraph (3)(B)(ii) and inserting
‘‘applicable to the contract and in effect as of the date
the reserve is determined’’.
(3) SPECIAL RULES.—Section 807(e) is amended—
(A) by striking paragraphs (2) and (5),
(B) by redesignating paragraphs (3), (4), (6), and (7)
as paragraphs (2), (3), (4), and (5), respectively,
(C) by amending paragraph (2) (as so redesignated)
to read as follows:
‘‘(2) QUALIFIED SUPPLEMENTAL BENEFITS.—
‘‘(A) QUALIFIED SUPPLEMENTAL BENEFITS TREATED
SEPARATELY.—For purposes of this part, the amount of
the life insurance reserve for any qualified supplemental
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26 USC 7702.
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benefit shall be computed separately as though such benefit
were under a separate contract.
‘‘(B) QUALIFIED SUPPLEMENTAL BENEFIT.—For purposes
of this paragraph, the term ‘qualified supplemental benefit’
means any supplemental benefit described in subparagraph
(C) if—
‘‘(i) there is a separately identified premium or
charge for such benefit, and
‘‘(ii) any net surrender value under the contract
attributable to any other benefit is not available to
fund such benefit.
‘‘(C) SUPPLEMENTAL BENEFITS.—For purposes of this
paragraph, the supplemental benefits described in this
subparagraph are any—
‘‘(i) guaranteed insurability,
‘‘(ii) accidental death or disability benefit,
‘‘(iii) convertibility,
‘‘(iv) disability waiver benefit, or
‘‘(v) other benefit prescribed by regulations,
which is supplemental to a contract for which there is
a reserve described in subsection (c).’’, and
(D) by adding at the end the following new paragraph:
‘‘(6) REPORTING RULES.—The Secretary shall require
reporting (at such time and in such manner as the Secretary
shall prescribe) with respect to the opening balance and closing
balance of reserves and with respect to the method of computing
reserves for purposes of determining income.’’.
(4) DEFINITION OF LIFE INSURANCE CONTRACT.—Section
7702 is amended—
(A) by striking clause (i) of subsection (c)(3)(B) and
inserting the following:
‘‘(i) reasonable mortality charges which meet the
requirements prescribed in regulations to be promulgated by the Secretary or that do not exceed the mortality charges specified in the prevailing commissioners’ standard tables as defined in subsection
(f)(10),’’ and
(B) by adding at the end of subsection (f) the following
new paragraph:
‘‘(10) PREVAILING COMMISSIONERS’ STANDARD TABLES.—For
purposes of subsection (c)(3)(B)(i), the term ‘prevailing commissioners’ standard tables’ means the most recent commissioners’
standard tables prescribed by the National Association of Insurance Commissioners which are permitted to be used in computing reserves for that type of contract under the insurance
laws of at least 26 States when the contract was issued. If
the prevailing commissioners’ standard tables as of the beginning of any calendar year (hereinafter in this paragraph
referred to as the ‘year of change’) are different from the prevailing commissioners’ standard tables as of the beginning of
the preceding calendar year, the issuer may use the prevailing
commissioners’ standard tables as of the beginning of the preceding calendar year with respect to any contract issued after
the change and before the close of the 3-year period beginning
on the first day of the year of change.’’.
(b) CONFORMING AMENDMENTS.—
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2147
(1) Section 808 is amended by adding at the end the following new subsection:
‘‘(g) PREVAILING STATE ASSUMED INTEREST RATE.—For purposes
of this subchapter—
‘‘(1) IN GENERAL.—The term ‘prevailing State assumed
interest rate’ means, with respect to any contract, the highest
assumed interest rate permitted to be used in computing life
insurance reserves for insurance contracts or annuity contracts
(as the case may be) under the insurance laws of at least
26 States. For purposes of the preceding sentence, the effect
of nonforfeiture laws of a State on interest rates for reserves
shall not be taken into account.
‘‘(2) WHEN RATE DETERMINED.—The prevailing State
assumed interest rate with respect to any contract shall be
determined as of the beginning of the calendar year in which
the contract was issued.’’.
(2) Paragraph (1) of section 811(d) is amended by striking
‘‘the greater of the prevailing State assumed interest rate or
applicable Federal interest rate in effect under section 807’’
and inserting ‘‘the interest rate in effect under section 808(g)’’.
(3) Subparagraph (A) of section 846(f)(6) is amended by
striking ‘‘except that’’ and all that follows and inserting ‘‘except
that the limitation of subsection (a)(3) shall apply, and’’.
(4) Section 848(e)(1)(B)(iii) is amended by striking
‘‘807(e)(4)’’ and inserting ‘‘807(e)(3)’’.
(5) Subparagraph (B) of section 954(i)(5) is amended by
striking ‘‘shall be substituted for the prevailing State assumed
interest rate,’’ and inserting ‘‘shall apply,’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
(2) TRANSITION RULE.—For the first taxable year beginning
after December 31, 2017, the reserve with respect to any contract (as determined under section 807(d) of the Internal Revenue Code of 1986) at the end of the preceding taxable year
shall be determined as if the amendments made by this section
had applied to such reserve in such preceding taxable year.
(3) TRANSITION RELIEF.—
(A) IN GENERAL.—If—
(i) the reserve determined under section 807(d)
of the Internal Revenue Code of 1986 (determined after
application of paragraph (2)) with respect to any contract as of the close of the year preceding the first
taxable year beginning after December 31, 2017, differs
from
(ii) the reserve which would have been determined
with respect to such contract as of the close of such
taxable year under such section determined without
regard to paragraph (2),
then the difference between the amount of the reserve
described in clause (i) and the amount of the reserve
described in clause (ii) shall be taken into account under
the method provided in subparagraph (B).
(B) METHOD.—The method provided in this subparagraph is as follows:
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(i) If the amount determined under subparagraph
(A)(i) exceeds the amount determined under subparagraph (A)(ii), 1/8 of such excess shall be taken into
account, for each of the 8 succeeding taxable years,
as a deduction under section 805(a)(2) or 832(c)(4) of
such Code, as applicable.
(ii) If the amount determined under subparagraph
(A)(ii) exceeds the amount determined under subparagraph (A)(i), 1/8 of such excess shall be included in
gross income, for each of the 8 succeeding taxable
years, under section 803(a)(2) or 832(b)(1)(C) of such
Code, as applicable.
SEC. 13518. MODIFICATION OF RULES FOR LIFE INSURANCE PRORATION FOR PURPOSES OF DETERMINING THE DIVIDENDS
RECEIVED DEDUCTION.
(a) IN GENERAL.—Section 812 is amended to read as follows:
26 USC 812.
‘‘SEC. 812. DEFINITION OF COMPANY’S SHARE AND POLICYHOLDER’S
SHARE.
26 USC 812 note.
‘‘(a) COMPANY’S SHARE.—For purposes of section 805(a)(4), the
term ‘company’s share’ means, with respect to any taxable year
beginning after December 31, 2017, 70 percent.
‘‘(b) POLICYHOLDER’S SHARE.—For purposes of section 807, the
term ‘policyholder’s share’ means, with respect to any taxable year
beginning after December 31, 2017, 30 percent.’’.
(b) CONFORMING AMENDMENT.—Section 817A(e)(2) is amended
by striking ‘‘, 807(d)(2)(B), and 812’’ and inserting ‘‘and 807(d)(2)(B)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISITION
EXPENSES.
26 USC 848 note.
(a) IN GENERAL.—
(1) Section 848(a)(2) is amended by striking ‘‘120-month’’
and inserting ‘‘180-month’’.
(2) Section 848(c)(1) is amended by striking ‘‘1.75 percent’’
and inserting ‘‘2.09 percent’’.
(3) Section 848(c)(2) is amended by striking ‘‘2.05 percent’’
and inserting ‘‘2.45 percent’’.
(4) Section 848(c)(3) is amended by striking ‘‘7.7 percent’’
and inserting ‘‘9.2 percent’’.
(b) CONFORMING AMENDMENTS.—Section 848(b)(1) is amended
by striking ‘‘120-month’’ and inserting ‘‘180-month’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to net premiums for taxable years beginning after
December 31, 2017.
(2) TRANSITION RULE.—Specified policy acquisition expenses
first required to be capitalized in a taxable year beginning
before January 1, 2018, will continue to be allowed as a deduction ratably over the 120-month period beginning with the
first month in the second half of such taxable year.
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SEC. 13520. TAX REPORTING FOR LIFE SETTLEMENT TRANSACTIONS.
(a) IN GENERAL.—Subpart B of part III of subchapter A of
chapter 61, as amended by section 13306, is amended by adding
at the end the following new section:
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131 STAT. 2149
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‘‘SEC. 6050Y. RETURNS RELATING TO CERTAIN LIFE INSURANCE CONTRACT TRANSACTIONS.
26 USC 6050Y.
‘‘(a) REQUIREMENT OF REPORTING OF CERTAIN PAYMENTS.—
‘‘(1) IN GENERAL.—Every person who acquires a life insurance contract or any interest in a life insurance contract in
a reportable policy sale during any taxable year shall make
a return for such taxable year (at such time and in such
manner as the Secretary shall prescribe) setting forth—
‘‘(A) the name, address, and TIN of such person,
‘‘(B) the name, address, and TIN of each recipient
of payment in the reportable policy sale,
‘‘(C) the date of such sale,
‘‘(D) the name of the issuer of the life insurance contract sold and the policy number of such contract, and
‘‘(E) the amount of each payment.
‘‘(2) STATEMENT TO BE FURNISHED TO PERSONS WITH
RESPECT TO WHOM INFORMATION IS REQUIRED.—Every person
required to make a return under this subsection shall furnish
to each person whose name is required to be set forth in
such return a written statement showing—
‘‘(A) the name, address, and phone number of the
information contact of the person required to make such
return, and
‘‘(B) the information required to be shown on such
return with respect to such person, except that in the
case of an issuer of a life insurance contract, such statement
is not required to include the information specified in paragraph (1)(E).
‘‘(b) REQUIREMENT OF REPORTING OF SELLER’S BASIS IN LIFE
INSURANCE CONTRACTS.—
‘‘(1) IN GENERAL.—Upon receipt of the statement required
under subsection (a)(2) or upon notice of a transfer of a life
insurance contract to a foreign person, each issuer of a life
insurance contract shall make a return (at such time and
in such manner as the Secretary shall prescribe) setting forth—
‘‘(A) the name, address, and TIN of the seller who
transfers any interest in such contract in such sale,
‘‘(B) the investment in the contract (as defined in section 72(e)(6)) with respect to such seller, and
‘‘(C) the policy number of such contract.
‘‘(2) STATEMENT TO BE FURNISHED TO PERSONS WITH
RESPECT TO WHOM INFORMATION IS REQUIRED.—Every person
required to make a return under this subsection shall furnish
to each person whose name is required to be set forth in
such return a written statement showing—
‘‘(A) the name, address, and phone number of the
information contact of the person required to make such
return, and
‘‘(B) the information required to be shown on such
return with respect to each seller whose name is required
to be set forth in such return.
‘‘(c) REQUIREMENT OF REPORTING WITH RESPECT TO REPORTABLE DEATH BENEFITS.—
‘‘(1) IN GENERAL.—Every person who makes a payment
of reportable death benefits during any taxable year shall make
a return for such taxable year (at such time and in such
manner as the Secretary shall prescribe) setting forth—
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‘‘(A) the name, address, and TIN of the person making
such payment,
‘‘(B) the name, address, and TIN of each recipient
of such payment,
‘‘(C) the date of each such payment,
‘‘(D) the gross amount of each such payment, and
‘‘(E) such person’s estimate of the investment in the
contract (as defined in section 72(e)(6)) with respect to
the buyer.
‘‘(2) STATEMENT TO BE FURNISHED TO PERSONS WITH
RESPECT TO WHOM INFORMATION IS REQUIRED.—Every person
required to make a return under this subsection shall furnish
to each person whose name is required to be set forth in
such return a written statement showing—
‘‘(A) the name, address, and phone number of the
information contact of the person required to make such
return, and
‘‘(B) the information required to be shown on such
return with respect to each recipient of payment whose
name is required to be set forth in such return.
‘‘(d) DEFINITIONS.—For purposes of this section:
‘‘(1) PAYMENT.—The term ‘payment’ means, with respect
to any reportable policy sale, the amount of cash and the
fair market value of any consideration transferred in the sale.
‘‘(2) REPORTABLE POLICY SALE.—The term ‘reportable policy
sale’ has the meaning given such term in section 101(a)(3)(B).
‘‘(3) ISSUER.—The term ‘issuer’ means any life insurance
company that bears the risk with respect to a life insurance
contract on the date any return or statement is required to
be made under this section.
‘‘(4) REPORTABLE DEATH BENEFITS.—The term ‘reportable
death benefits’ means amounts paid by reason of the death
of the insured under a life insurance contract that has been
transferred in a reportable policy sale.’’.
(b) CLERICAL AMENDMENT.—The table of sections for subpart
B of part III of subchapter A of chapter 61, as amended by section
13306, is amended by inserting after the item relating to section
6050X the following new item:
26 USC
prec. 6041.
‘‘Sec. 6050Y. Returns relating to certain life insurance contract transactions.’’.
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26 USC 6724.
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(c) CONFORMING AMENDMENTS.—
(1) Subsection (d) of section 6724 is amended—
(A) by striking ‘‘or’’ at the end of clause (xxiv) of paragraph (1)(B), by striking ‘‘and’’ at the end of clause (xxv)
of such paragraph and inserting ‘‘or’’, and by inserting
after such clause (xxv) the following new clause:
‘‘(xxvi) section 6050Y (relating to returns relating
to certain life insurance contract transactions), and’’,
and
(B) by striking ‘‘or’’ at the end of subparagraph (HH)
of paragraph (2), by striking the period at the end of
subparagraph (II) of such paragraph and inserting ‘‘, or’’,
and by inserting after such subparagraph (II) the following
new subparagraph:
‘‘(JJ) subsection (a)(2), (b)(2), or (c)(2) of section 6050Y
(relating to returns relating to certain life insurance contract transactions).’’.
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131 STAT. 2151
(2) Section 6047 is amended—
(A) by redesignating subsection (g) as subsection (h),
(B) by inserting after subsection (f) the following new
subsection:
‘‘(g) INFORMATION RELATING TO LIFE INSURANCE CONTRACT
TRANSACTIONS.—This section shall not apply to any information
which is required to be reported under section 6050Y.’’, and
(C) by adding at the end of subsection (h), as so redesignated, the following new paragraph:
‘‘(4) For provisions requiring reporting of information
relating to certain life insurance contract transactions, see section 6050Y.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to—
(1) reportable policy sales (as defined in section 6050Y(d)(2)
of the Internal Revenue Code of 1986 (as added by subsection
(a)) after December 31, 2017, and
(2) reportable death benefits (as defined in section
6050Y(d)(4) of such Code (as added by subsection (a)) paid
after December 31, 2017.
26 USC 6047.
26 USC 6047
note.
SEC. 13521. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE CONTRACTS.
(a) CLARIFICATION WITH RESPECT TO ADJUSTMENTS.—Paragraph (1) of section 1016(a) is amended by striking subparagraph
(A) and all that follows and inserting the following:
‘‘(A) for—
‘‘(i) taxes or other carrying charges described in
section 266; or
‘‘(ii) expenditures described in section 173 (relating
to circulation expenditures),
for which deductions have been taken by the taxpayer
in determining taxable income for the taxable year or prior
taxable years; or
‘‘(B) for mortality, expense, or other reasonable charges
incurred under an annuity or life insurance contract;’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to transactions entered into after August 25, 2009.
26 USC 1016
note.
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SEC. 13522. EXCEPTION TO TRANSFER FOR VALUABLE CONSIDERATION RULES.
(a) IN GENERAL.—Subsection (a) of section 101 is amended
by inserting after paragraph (2) the following new paragraph:
‘‘(3) EXCEPTION TO VALUABLE CONSIDERATION RULES FOR
COMMERCIAL TRANSFERS.—
‘‘(A) IN GENERAL.—The second sentence of paragraph
(2) shall not apply in the case of a transfer of a life
insurance contract, or any interest therein, which is a
reportable policy sale.
‘‘(B) REPORTABLE POLICY SALE.—For purposes of this
paragraph, the term ‘reportable policy sale’ means the
acquisition of an interest in a life insurance contract,
directly or indirectly, if the acquirer has no substantial
family, business, or financial relationship with the insured
apart from the acquirer’s interest in such life insurance
contract. For purposes of the preceding sentence, the term
‘indirectly’ applies to the acquisition of an interest in a
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26 USC 101.
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PUBLIC LAW 115–97—DEC. 22, 2017
partnership, trust, or other entity that holds an interest
in the life insurance contract.’’.
(b) CONFORMING AMENDMENT.—Paragraph (1) of section 101(a)
is amended by striking ‘‘paragraph (2)’’ and inserting ‘‘paragraphs
(2) and (3)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to transfers after December 31, 2017.
SEC. 13523. MODIFICATION OF DISCOUNTING RULES FOR PROPERTY
AND CASUALTY INSURANCE COMPANIES.
26 USC 846 note.
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26 USC 846 note.
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(a) MODIFICATION OF RATE OF INTEREST USED TO DISCOUNT
UNPAID LOSSES.—Paragraph (2) of section 846(c) is amended to
read as follows:
‘‘(2) DETERMINATION OF ANNUAL RATE.—The annual rate
determined by the Secretary under this paragraph for any
calendar year shall be a rate determined on the basis of the
corporate bond yield curve (as defined in section 430(h)(2)(D)(i),
determined by substituting ‘60-month period’ for ‘24-month
period’ therein).’’.
(b) MODIFICATION OF COMPUTATIONAL RULES FOR LOSS PAYMENT PATTERNS.—Section 846(d)(3) is amended by striking subparagraphs (B) through (G) and inserting the following new subparagraph:
‘‘(B) TREATMENT OF CERTAIN LOSSES.—
‘‘(i) 3-YEAR LOSS PAYMENT PATTERN.—In the case
of any line of business not described in subparagraph
(A)(ii), losses paid after the 1st year following the
accident year shall be treated as paid equally in the
2nd and 3rd year following the accident year.
‘‘(ii) 10-YEAR LOSS PAYMENT PATTERN.—
‘‘(I) IN GENERAL.—The period taken into
account under subparagraph (A)(ii) shall be
extended to the extent required under subclause
(II).
‘‘(II) COMPUTATION OF EXTENSION.—The
amount of losses which would have been treated
as paid in the 10th year after the accident year
shall be treated as paid in such 10th year and
each subsequent year in an amount equal to the
amount of the average of the losses treated as
paid in the 7th, 8th, and 9th years after the
accident year (or, if lesser, the portion of the
unpaid losses not theretofore taken into account).
To the extent such unpaid losses have not been
treated as paid before the 24th year after the
accident year, they shall be treated as paid in
such 24th year.’’.
(c) REPEAL OF HISTORICAL PAYMENT PATTERN ELECTION.—Section 846, as amended by this Act, is amended by striking subsection
(e) and by redesignating subsections (f) and (g) as subsections
(e) and (f), respectively.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
(e) TRANSITIONAL RULE.—For the first taxable year beginning
after December 31, 2017—
(1) the unpaid losses and the expenses unpaid (as defined
in paragraphs (5)(B) and (6) of section 832(b) of the Internal
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131 STAT. 2153
Revenue Code of 1986) at the end of the preceding taxable
year, and
(2) the unpaid losses as defined in sections 807(c)(2) and
805(a)(1) of such Code at the end of the preceding taxable
year,
shall be determined as if the amendments made by this section
had applied to such unpaid losses and expenses unpaid in the
preceding taxable year and by using the interest rate and loss
payment patterns applicable to accident years ending with calendar
year 2018, and any adjustment shall be taken into account ratably
in such first taxable year and the 7 succeeding taxable years.
For subsequent taxable years, such amendments shall be applied
with respect to such unpaid losses and expenses unpaid by using
the interest rate and loss payment patterns applicable to accident
years ending with calendar year 2018.
Subpart C—Banks and Financial Instruments
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SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS.
(a) IN GENERAL.—Section 162, as amended by sections 13307,
is amended by redesignating subsection (r) as subsection (s) and
by inserting after subsection (q) the following new subsection:
‘‘(r) DISALLOWANCE OF FDIC PREMIUMS PAID BY CERTAIN LARGE
FINANCIAL INSTITUTIONS.—
‘‘(1) IN GENERAL.—No deduction shall be allowed for the
applicable percentage of any FDIC premium paid or incurred
by the taxpayer.
‘‘(2) EXCEPTION FOR SMALL INSTITUTIONS.—Paragraph (1)
shall not apply to any taxpayer for any taxable year if the
total consolidated assets of such taxpayer (determined as of
the close of such taxable year) do not exceed $10,000,000,000.
‘‘(3) APPLICABLE PERCENTAGE.—For purposes of this subsection, the term ‘applicable percentage’ means, with respect
to any taxpayer for any taxable year, the ratio (expressed
as a percentage but not greater than 100 percent) which—
‘‘(A) the excess of—
‘‘(i) the total consolidated assets of such taxpayer
(determined as of the close of such taxable year), over
‘‘(ii) $10,000,000,000, bears to
‘‘(B) $40,000,000,000.
‘‘(4) FDIC PREMIUMS.—For purposes of this subsection, the
term ‘FDIC premium’ means any assessment imposed under
section 7(b) of the Federal Deposit Insurance Act (12 U.S.C.
1817(b)).
‘‘(5) TOTAL CONSOLIDATED ASSETS.—For purposes of this
subsection, the term ‘total consolidated assets’ has the meaning
given such term under section 165 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (12 U.S.C. 5365).
‘‘(6) AGGREGATION RULE.—
‘‘(A) IN GENERAL.—Members of an expanded affiliated
group shall be treated as a single taxpayer for purposes
of applying this subsection.
‘‘(B) EXPANDED AFFILIATED GROUP.—
‘‘(i) IN GENERAL.—For purposes of this paragraph,
the term ‘expanded affiliated group’ means an affiliated
group as defined in section 1504(a), determined—
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PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(I) by substituting ‘more than 50 percent’ for
‘at least 80 percent’ each place it appears, and
‘‘(II) without regard to paragraphs (2) and (3)
of section 1504(b).
‘‘(ii) CONTROL OF NON-CORPORATE ENTITIES.—A
partnership or any other entity (other than a corporation) shall be treated as a member of an expanded
affiliated group if such entity is controlled (within the
meaning of section 954(d)(3)) by members of such group
(including any entity treated as a member of such
group by reason of this clause).’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
SEC. 13532. REPEAL OF ADVANCE REFUNDING BONDS.
26 USC 149.
26 USC 148 note.
(a) IN GENERAL.—Paragraph (1) of section 149(d) is amended
by striking ‘‘as part of an issue described in paragraph (2), (3),
or (4).’’ and inserting ‘‘to advance refund another bond.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 149(d) is amended by striking paragraphs (2),
(3), (4), and (6) and by redesignating paragraphs (5) and (7)
as paragraphs (2) and (3).
(2) Section 148(f)(4)(C) is amended by striking clause (xiv)
and by redesignating clauses (xv) to (xvii) as clauses (xiv)
to (xvi).
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to advance refunding bonds issued after December 31,
2017.
Subpart D—S Corporations
SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF AN
ELECTING SMALL BUSINESS TRUST.
(a) NO LOOK-THROUGH FOR ELIGIBILITY PURPOSES.—Section
1361(c)(2)(B)(v) is amended by adding at the end the following
new sentence: ‘‘This clause shall not apply for purposes of subsection
(b)(1)(C).’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall take effect on January 1, 2018.
26 USC 1361
note.
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SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR ELECTING
SMALL BUSINESS TRUSTS.
26 USC 641 note.
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(a) IN GENERAL.—Section 641(c)(2) is amended by inserting
after subparagraph (D) the following new subparagraph:
‘‘(E)(i) Section 642(c) shall not apply.
‘‘(ii) For purposes of section 170(b)(1)(G), adjusted gross
income shall be computed in the same manner as in the
case of an individual, except that the deductions for costs
which are paid or incurred in connection with the administration of the trust and which would not have been incurred
if the property were not held in such trust shall be treated
as allowable in arriving at adjusted gross income.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2017.
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131 STAT. 2155
SEC. 13543. MODIFICATION OF TREATMENT OF S CORPORATION
CONVERSIONS TO C CORPORATIONS.
(a) ADJUSTMENTS ATTRIBUTABLE TO
PORATION TO C CORPORATION.—Section
CONVERSION FROM S COR481 is amended by adding
26 USC 481.
at the end the following new subsection:
‘‘(d) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION FROM S CORPORATION TO C CORPORATION.—
‘‘(1) IN GENERAL.—In the case of an eligible terminated
S corporation, any adjustment required by subsection (a)(2)
which is attributable to such corporation’s revocation described
in paragraph (2)(A)(ii) shall be taken into account ratably
during the 6-taxable year period beginning with the year of
change.
‘‘(2) ELIGIBLE TERMINATED S CORPORATION.—For purposes
of this subsection, the term ‘eligible terminated S corporation’
means any C corporation—
‘‘(A) which—
‘‘(i) was an S corporation on the day before the
date of the enactment of the Tax Cuts and Jobs Act,
and
‘‘(ii) during the 2-year period beginning on the
date of such enactment makes a revocation of its election under section 1362(a), and
‘‘(B) the owners of the stock of which, determined on
the date such revocation is made, are the same owners
(and in identical proportions) as on the date of such enactment.’’.
(b) CASH DISTRIBUTIONS FOLLOWING POST-TERMINATION TRANSITION PERIOD FROM S CORPORATION STATUS.—Section 1371 is
amended by adding at the end the following new subsection:
‘‘(f) CASH DISTRIBUTIONS FOLLOWING POST-TERMINATION
TRANSITION PERIOD.—In the case of a distribution of money by
an eligible terminated S corporation (as defined in section 481(d))
after the post-termination transition period, the accumulated adjustments account shall be allocated to such distribution, and the
distribution shall be chargeable to accumulated earnings and
profits, in the same ratio as the amount of such accumulated
adjustments account bears to the amount of such accumulated
earnings and profits.’’.
PART VII—EMPLOYMENT
Subpart A—Compensation
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SEC. 13601. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE
REMUNERATION.
(a) REPEAL OF PERFORMANCE-BASED COMPENSATION AND
COMMISSION EXCEPTIONS FOR LIMITATION ON EXCESSIVE EMPLOYEE
REMUNERATION.—
(1) IN GENERAL.—Paragraph (4) of section 162(m) is
amended by striking subparagraphs (B) and (C) and by redesignating subparagraphs (D), (E), (F), and (G) as subparagraphs
(B), (C), (D), and (E), respectively.
(2) CONFORMING AMENDMENTS.—
(A) Paragraphs (5)(E) and (6)(D) of section 162(m) are
each amended by striking ‘‘subparagraphs (B), (C), and
(D)’’ and inserting ‘‘subparagraph (B)’’.
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26 USC 162.
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PUBLIC LAW 115–97—DEC. 22, 2017
(B) Paragraphs (5)(G) and (6)(G) of section 162(m) are
each amended by striking ‘‘(F) and (G)’’ and inserting ‘‘(D)
and (E)’’.
(b) MODIFICATION OF DEFINITION OF COVERED EMPLOYEES.—
Paragraph (3) of section 162(m) is amended—
(1) in subparagraph (A), by striking ‘‘as of the close of
the taxable year, such employee is the chief executive officer
of the taxpayer or is’’ and inserting ‘‘such employee is the
principal executive officer or principal financial officer of the
taxpayer at any time during the taxable year, or was’’,
(2) in subparagraph (B)—
(A) by striking ‘‘4’’ and inserting ‘‘3’’, and
(B) by striking ‘‘(other than the chief executive officer)’’
and inserting ‘‘(other than any individual described in
subparagraph (A))’’, and
(3) by striking ‘‘or’’ at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and inserting
‘‘, or’’, and by adding at the end the following:
‘‘(C) was a covered employee of the taxpayer (or any
predecessor) for any preceding taxable year beginning after
December 31, 2016.’’.
(c) EXPANSION OF APPLICABLE EMPLOYER.—
(1) IN GENERAL.—Section 162(m)(2) is amended to read
as follows:
‘‘(2) PUBLICLY HELD CORPORATION.—For purposes of this
subsection, the term ‘publicly held corporation’ means any corporation which is an issuer (as defined in section 3 of the
Securities Exchange Act of 1934 (15 U.S.C. 78c))—
‘‘(A) the securities of which are required to be registered under section 12 of such Act (15 U.S.C. 78l), or
‘‘(B) that is required to file reports under section 15(d)
of such Act (15 U.S.C. 78o(d)).’’.
(2) CONFORMING AMENDMENT.—Section 162(m)(3), as
amended by subsection (b), is amended by adding at the end
the following flush sentence:
‘‘Such term shall include any employee who would be
described in subparagraph (B) if the reporting described in
such subparagraph were required as so described.’’.
(d) SPECIAL RULE FOR REMUNERATION PAID TO BENEFICIARIES,
ETC.—Paragraph (4) of section 162(m), as amended by subsection
(a), is amended by adding at the end the following new subparagraph:
‘‘(F) SPECIAL RULE FOR REMUNERATION PAID TO BENEFICIARIES, ETC.—Remuneration shall not fail to be
applicable employee remuneration merely because it is
includible in the income of, or paid to, a person other
than the covered employee, including after the death of
the covered employee.’’.
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2017.
(2) EXCEPTION FOR BINDING CONTRACTS.—The amendments
made by this section shall not apply to remuneration which
is provided pursuant to a written binding contract which was
in effect on November 2, 2017, and which was not modified
in any material respect on or after such date.
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131 STAT. 2157
SEC. 13602. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZATION
EXECUTIVE COMPENSATION.
(a) IN GENERAL.—Subchapter D of chapter 42 is amended by
adding at the end the following new section:
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‘‘SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE
COMPENSATION.
26 USC 4960
note.
‘‘(a) TAX IMPOSED.—There is hereby imposed a tax equal to
the product of the rate of tax under section 11 and the sum of—
‘‘(1) so much of the remuneration paid (other than any
excess parachute payment) by an applicable tax-exempt
organization for the taxable year with respect to employment
of any covered employee in excess of $1,000,000, plus
‘‘(2) any excess parachute payment paid by such an
organization to any covered employee.
For purposes of the preceding sentence, remuneration shall be
treated as paid when there is no substantial risk of forfeiture
(within the meaning of section 457(f)(3)(B)) of the rights to such
remuneration.
‘‘(b) LIABILITY FOR TAX.—The employer shall be liable for the
tax imposed under subsection (a).
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For purposes of this
section—
‘‘(1) APPLICABLE TAX-EXEMPT ORGANIZATION.—The term
‘applicable tax-exempt organization’ means any organization
which for the taxable year—
‘‘(A) is exempt from taxation under section 501(a),
‘‘(B) is a farmers’ cooperative organization described
in section 521(b)(1),
‘‘(C) has income excluded from taxation under section
115(1), or
‘‘(D) is a political organization described in section
527(e)(1).
‘‘(2) COVERED EMPLOYEE.—For purposes of this section, the
term ‘covered employee’ means any employee (including any
former employee) of an applicable tax-exempt organization if
the employee—
‘‘(A) is one of the 5 highest compensated employees
of the organization for the taxable year, or
‘‘(B) was a covered employee of the organization (or
any predecessor) for any preceding taxable year beginning
after December 31, 2016.
‘‘(3) REMUNERATION.—For purposes of this section:
‘‘(A) IN GENERAL.—The term ‘remuneration’ means
wages (as defined in section 3401(a)), except that such
term shall not include any designated Roth contribution
(as defined in section 402A(c)) and shall include amounts
required to be included in gross income under section 457(f).
‘‘(B) EXCEPTION FOR REMUNERATION FOR MEDICAL SERVICES.—The term ‘remuneration’ shall not include the portion of any remuneration paid to a licensed medical professional (including a veterinarian) which is for the performance of medical or veterinary services by such professional.
‘‘(4) REMUNERATION FROM RELATED ORGANIZATIONS.—
‘‘(A) IN GENERAL.—Remuneration of a covered employee
by an applicable tax-exempt organization shall include any
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131 STAT. 2158
PUBLIC LAW 115–97—DEC. 22, 2017
remuneration paid with respect to employment of such
employee by any related person or governmental entity.
‘‘(B) RELATED ORGANIZATIONS.—A person or governmental entity shall be treated as related to an applicable
tax-exempt organization if such person or governmental
entity—
‘‘(i) controls, or is controlled by, the organization,
‘‘(ii) is controlled by one or more persons which
control the organization,
‘‘(iii) is a supported organization (as defined in
section 509(f)(3)) during the taxable year with respect
to the organization,
‘‘(iv) is a supporting organization described in section 509(a)(3) during the taxable year with respect
to the organization, or
‘‘(v) in the case of an organization which is a
voluntary employees’ beneficiary association described
in section 501(c)(9), establishes, maintains, or makes
contributions to such voluntary employees’ beneficiary
association.
‘‘(C) LIABILITY FOR TAX.—In any case in which remuneration from more than one employer is taken into account
under this paragraph in determining the tax imposed by
subsection (a), each such employer shall be liable for such
tax in an amount which bears the same ratio to the total
tax determined under subsection (a) with respect to such
remuneration as—
‘‘(i) the amount of remuneration paid by such
employer with respect to such employee, bears to
‘‘(ii) the amount of remuneration paid by all such
employers to such employee.
‘‘(5) EXCESS PARACHUTE PAYMENT.—For purposes of determining the tax imposed by subsection (a)(2)—
‘‘(A) IN GENERAL.—The term ‘excess parachute payment’ means an amount equal to the excess of any parachute payment over the portion of the base amount allocated to such payment.
‘‘(B) PARACHUTE PAYMENT.—The term ‘parachute payment’ means any payment in the nature of compensation
to (or for the benefit of) a covered employee if—
‘‘(i) such payment is contingent on such employee’s
separation from employment with the employer, and
‘‘(ii) the aggregate present value of the payments
in the nature of compensation to (or for the benefit
of) such individual which are contingent on such separation equals or exceeds an amount equal to 3 times
the base amount.
‘‘(C) EXCEPTION.—Such term does not include any payment—
‘‘(i) described in section 280G(b)(6) (relating to
exemption for payments under qualified plans),
‘‘(ii) made under or to an annuity contract
described in section 403(b) or a plan described in section 457(b),
‘‘(iii) to a licensed medical professional (including
a veterinarian) to the extent that such payment is
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131 STAT. 2159
for the performance of medical or veterinary services
by such professional, or
‘‘(iv) to an individual who is not a highly compensated employee as defined in section 414(q).
‘‘(D) BASE AMOUNT.—Rules similar to the rules of
280G(b)(3) shall apply for purposes of determining the base
amount.
‘‘(E) PROPERTY TRANSFERS; PRESENT VALUE.—Rules
similar to the rules of paragraphs (3) and (4) of section
280G(d) shall apply.
‘‘(6) COORDINATION WITH DEDUCTION LIMITATION.—Remuneration the deduction for which is not allowed by reason
of section 162(m) shall not be taken into account for purposes
of this section.
‘‘(d) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to prevent avoidance of the tax under
this section, including regulations to prevent avoidance of such
tax through the performance of services other than as an employee
or by providing compensation through a pass-through or other
entity to avoid such tax.’’.
(b) CLERICAL AMENDMENT.—The table of sections for subchapter
D of chapter 42 is amended by adding at the end the following
new item:
26 USC
prec. 4958.
‘‘Sec. 4960. Tax on excess tax-exempt organization executive compensation.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 4960
note.
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SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS.
(a) IN GENERAL.—Section 83 is amended by adding at the
end the following new subsection:
‘‘(i) QUALIFIED EQUITY GRANTS.—
‘‘(1) IN GENERAL.—For purposes of this subtitle—
‘‘(A) TIMING OF INCLUSION.—If qualified stock is transferred to a qualified employee who makes an election with
respect to such stock under this subsection, subsection
(a) shall be applied by including the amount determined
under such subsection with respect to such stock in income
of the employee in the taxable year determined under
subparagraph (B) in lieu of the taxable year described
in subsection (a).
‘‘(B) TAXABLE YEAR DETERMINED.—The taxable year
determined under this subparagraph is the taxable year
of the employee which includes the earliest of—
‘‘(i) the first date such qualified stock becomes
transferable (including, solely for purposes of this
clause, becoming transferable to the employer),
‘‘(ii) the date the employee first becomes an
excluded employee,
‘‘(iii) the first date on which any stock of the corporation which issued the qualified stock becomes
readily tradable on an established securities market
(as determined by the Secretary, but not including
any market unless such market is recognized as an
established securities market by the Secretary for purposes of a provision of this title other than this subsection),
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‘‘(iv) the date that is 5 years after the first date
the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, or
‘‘(v) the date on which the employee revokes (at
such time and in such manner as the Secretary provides) the election under this subsection with respect
to such stock.
‘‘(2) QUALIFIED STOCK.—
‘‘(A) IN GENERAL.—For purposes of this subsection, the
term ‘qualified stock’ means, with respect to any qualified
employee, any stock in a corporation which is the employer
of such employee, if—
‘‘(i) such stock is received—
‘‘(I) in connection with the exercise of an
option, or
‘‘(II) in settlement of a restricted stock unit,
and
‘‘(ii) such option or restricted stock unit was
granted by the corporation—
‘‘(I) in connection with the performance of services as an employee, and
‘‘(II) during a calendar year in which such
corporation was an eligible corporation.
‘‘(B) LIMITATION.—The term ‘qualified stock’ shall not
include any stock if the employee may sell such stock
to, or otherwise receive cash in lieu of stock from, the
corporation at the time that the rights of the employee
in such stock first become transferable or not subject to
a substantial risk of forfeiture.
‘‘(C) ELIGIBLE CORPORATION.—For purposes of subparagraph (A)(ii)(II)—
‘‘(i) IN GENERAL.—The term ‘eligible corporation’
means, with respect to any calendar year, any corporation if—
‘‘(I) no stock of such corporation (or any predecessor of such corporation) is readily tradable on
an established securities market (as determined
under paragraph (1)(B)(iii)) during any preceding
calendar year, and
‘‘(II) such corporation has a written plan under
which, in such calendar year, not less than 80
percent of all employees who provide services to
such corporation in the United States (or any
possession of the United States) are granted stock
options, or are granted restricted stock units, with
the same rights and privileges to receive qualified
stock.
‘‘(ii) SAME RIGHTS AND PRIVILEGES.—For purposes
of clause (i)(II)—
‘‘(I) except as provided in subclauses (II) and
(III), the determination of rights and privileges
with respect to stock shall be made in a similar
manner as under section 423(b)(5),
‘‘(II) employees shall not fail to be treated
as having the same rights and privileges to receive
qualified stock solely because the number of shares
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131 STAT. 2161
available to all employees is not equal in amount,
so long as the number of shares available to each
employee is more than a de minimis amount, and
‘‘(III) rights and privileges with respect to the
exercise of an option shall not be treated as the
same as rights and privileges with respect to the
settlement of a restricted stock unit.
‘‘(iii) EMPLOYEE.—For purposes of clause (i)(II), the
term ‘employee’ shall not include any employee
described in section 4980E(d)(4) or any excluded
employee.
‘‘(iv) SPECIAL RULE FOR CALENDAR YEARS BEFORE
2018.—In the case of any calendar year beginning before
January 1, 2018, clause (i)(II) shall be applied without
regard to whether the rights and privileges with
respect to the qualified stock are the same.
‘‘(3) QUALIFIED EMPLOYEE; EXCLUDED EMPLOYEE.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘qualified employee’ means
any individual who—
‘‘(i) is not an excluded employee, and
‘‘(ii) agrees in the election made under this subsection to meet such requirements as are determined
by the Secretary to be necessary to ensure that the
withholding requirements of the corporation under
chapter 24 with respect to the qualified stock are met.
‘‘(B) EXCLUDED EMPLOYEE.—The term ‘excluded
employee’ means, with respect to any corporation, any individual—
‘‘(i) who is a 1-percent owner (within the meaning
of section 416(i)(1)(B)(ii)) at any time during the calendar year or who was such a 1 percent owner at
any time during the 10 preceding calendar years,
‘‘(ii) who is or has been at any prior time—
‘‘(I) the chief executive officer of such corporation or an individual acting in such a capacity,
or
‘‘(II) the chief financial officer of such corporation or an individual acting in such a capacity,
‘‘(iii) who bears a relationship described in section
318(a)(1) to any individual described in subclause (I)
or (II) of clause (ii), or
‘‘(iv) who is one of the 4 highest compensated officers of such corporation for the taxable year, or was
one of the 4 highest compensated officers of such corporation for any of the 10 preceding taxable years,
determined with respect to each such taxable year
on the basis of the shareholder disclosure rules for
compensation under the Securities Exchange Act of
1934 (as if such rules applied to such corporation).
‘‘(4) ELECTION.—
‘‘(A) TIME FOR MAKING ELECTION.—An election with
respect to qualified stock shall be made under this subsection no later than 30 days after the first date the rights
of the employee in such stock are transferable or are not
subject to a substantial risk of forfeiture, whichever occurs
earlier, and shall be made in a manner similar to the
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manner in which an election is made under subsection
(b).
‘‘(B) LIMITATIONS.—No election may be made under
this section with respect to any qualified stock if—
‘‘(i) the qualified employee has made an election
under subsection (b) with respect to such qualified
stock,
‘‘(ii) any stock of the corporation which issued the
qualified stock is readily tradable on an established
securities market (as determined under paragraph
(1)(B)(iii)) at any time before the election is made,
or
‘‘(iii) such corporation purchased any of its outstanding stock in the calendar year preceding the calendar year which includes the first date the rights
of the employee in such stock are transferable or are
not subject to a substantial risk of forfeiture, unless—
‘‘(I) not less than 25 percent of the total dollar
amount of the stock so purchased is deferral stock,
and
‘‘(II) the determination of which individuals
from whom deferral stock is purchased is made
on a reasonable basis.
‘‘(C) DEFINITIONS AND SPECIAL RULES RELATED TO
LIMITATION ON STOCK REDEMPTIONS.—
‘‘(i) DEFERRAL STOCK.—For purposes of this paragraph, the term ‘deferral stock’ means stock with
respect to which an election is in effect under this
subsection.
‘‘(ii) DEFERRAL STOCK WITH RESPECT TO ANY INDI-
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VIDUAL NOT TAKEN INTO ACCOUNT IF INDIVIDUAL HOLDS
DEFERRAL STOCK WITH LONGER DEFERRAL PERIOD.—
Stock purchased by a corporation from any individual
shall not be treated as deferral stock for purposes
of subparagraph (B)(iii) if such individual (immediately
after such purchase) holds any deferral stock with
respect to which an election has been in effect under
this subsection for a longer period than the election
with respect to the stock so purchased.
‘‘(iii) PURCHASE OF ALL OUTSTANDING DEFERRAL
STOCK.—The requirements of subclauses (I) and (II)
of subparagraph (B)(iii) shall be treated as met if the
stock so purchased includes all of the corporation’s
outstanding deferral stock.
‘‘(iv) REPORTING.—Any corporation which has outstanding deferral stock as of the beginning of any
calendar year and which purchases any of its outstanding stock during such calendar year shall include
on its return of tax for the taxable year in which,
or with which, such calendar year ends the total dollar
amount of its outstanding stock so purchased during
such calendar year and such other information as the
Secretary requires for purposes of administering this
paragraph.
‘‘(5) CONTROLLED GROUPS.—For purposes of this subsection,
all persons treated as a single employer under section 414(b)
shall be treated as 1 corporation.
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‘‘(6) NOTICE REQUIREMENT.—Any corporation which transfers qualified stock to a qualified employee shall, at the time
that (or a reasonable period before) an amount attributable
to such stock would (but for this subsection) first be includible
in the gross income of such employee—
‘‘(A) certify to such employee that such stock is qualified stock, and
‘‘(B) notify such employee—
‘‘(i) that the employee may be eligible to elect
to defer income on such stock under this subsection,
and
‘‘(ii) that, if the employee makes such an election—
‘‘(I) the amount of income recognized at the
end of the deferral period will be based on the
value of the stock at the time at which the rights
of the employee in such stock first become transferable or not subject to substantial risk of forfeiture,
notwithstanding whether the value of the stock
has declined during the deferral period,
‘‘(II) the amount of such income recognized
at the end of the deferral period will be subject
to withholding under section 3401(i) at the rate
determined under section 3402(t), and
‘‘(III) the responsibilities of the employee (as
determined by the Secretary under paragraph
(3)(A)(ii)) with respect to such withholding.
‘‘(7) RESTRICTED STOCK UNITS.—This section (other than
this subsection), including any election under subsection (b),
shall not apply to restricted stock units.’’.
(b) WITHHOLDING.—
(1) TIME OF WITHHOLDING.—Section 3401 is amended by
adding at the end the following new subsection:
‘‘(i) QUALIFIED STOCK FOR WHICH AN ELECTION IS IN EFFECT
UNDER SECTION 83(I).—For purposes of subsection (a), qualified
stock (as defined in section 83(i)) with respect to which an election
is made under section 83(i) shall be treated as wages—
‘‘(1) received on the earliest date described in section
83(i)(1)(B), and
‘‘(2) in an amount equal to the amount included in income
under section 83 for the taxable year which includes such
date.’’.
(2) AMOUNT OF WITHHOLDING.—Section 3402 is amended
by adding at the end the following new subsection:
‘‘(t) RATE OF WITHHOLDING FOR CERTAIN STOCK.—In the case
of any qualified stock (as defined in section 83(i)(2)) with respect
to which an election is made under section 83(i)—
‘‘(1) the rate of tax under subsection (a) shall not be less
than the maximum rate of tax in effect under section 1, and
‘‘(2) such stock shall be treated for purposes of section
3501(b) in the same manner as a non-cash fringe benefit.’’.
(c) COORDINATION WITH OTHER DEFERRED COMPENSATION
RULES.—
(1) ELECTION TO APPLY DEFERRAL TO STATUTORY OPTIONS.—
(A) INCENTIVE STOCK OPTIONS.—Section 422(b) is
amended by adding at the end the following: ‘‘Such term
shall not include any option if an election is made under
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PUBL097
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26 USC 423.
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26 USC 83 note.
26 USC 83 note.
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PUBLIC LAW 115–97—DEC. 22, 2017
section 83(i) with respect to the stock received in connection
with the exercise of such option.’’.
(B) EMPLOYEE STOCK PURCHASE PLANS.—Section 423
is amended—
(i) in subsection (b)(5), by striking ‘‘and’’ before
‘‘the plan’’ and by inserting ‘‘, and the rules of section
83(i) shall apply in determining which employees have
a right to make an election under such section’’ before
the semicolon at the end, and
(ii) by adding at the end the following new subsection:
‘‘(d) COORDINATION WITH QUALIFIED EQUITY GRANTS.—An
option for which an election is made under section 83(i) with respect
to the stock received in connection with its exercise shall not be
considered as granted pursuant an employee stock purchase plan.’’.
(2) EXCLUSION FROM DEFINITION OF NONQUALIFIED
DEFERRED COMPENSATION PLAN.—Subsection (d) of section 409A
is amended by adding at the end the following new paragraph:
‘‘(7) TREATMENT OF QUALIFIED STOCK.—An arrangement
under which an employee may receive qualified stock (as
defined in section 83(i)(2)) shall not be treated as a nonqualified
deferred compensation plan with respect to such employee
solely because of such employee’s election, or ability to make
an election, to defer recognition of income under section 83(i).’’.
(d) INFORMATION REPORTING.—Section 6051(a) is amended by
striking ‘‘and’’ at the end of paragraph (14)(B), by striking the
period at the end of paragraph (15) and inserting a comma, and
by inserting after paragraph (15) the following new paragraphs:
‘‘(16) the amount includible in gross income under subparagraph (A) of section 83(i)(1) with respect to an event described
in subparagraph (B) of such section which occurs in such calendar year, and
‘‘(17) the aggregate amount of income which is being
deferred pursuant to elections under section 83(i), determined
as of the close of the calendar year.’’.
(e) PENALTY FOR FAILURE OF EMPLOYER TO PROVIDE NOTICE
OF TAX CONSEQUENCES.—Section 6652 is amended by adding at
the end the following new subsection:
‘‘(p) FAILURE TO PROVIDE NOTICE UNDER SECTION 83(I).—In
the case of each failure to provide a notice as required by section
83(i)(6), at the time prescribed therefor, unless it is shown that
such failure is due to reasonable cause and not to willful neglect,
there shall be paid, on notice and demand of the Secretary and
in the same manner as tax, by the person failing to provide such
notice, an amount equal to $100 for each such failure, but the
total amount imposed on such person for all such failures during
any calendar year shall not exceed $50,000.’’.
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to stock attributable to options exercised, or restricted stock units settled,
after December 31, 2017.
(2) REQUIREMENT TO PROVIDE NOTICE.—The amendments
made by subsection (e) shall apply to failures after December
31, 2017.
(g) TRANSITION RULE.—Until such time as the Secretary (or
the Secretary’s delegate) issues regulations or other guidance for
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131 STAT. 2165
purposes of implementing the requirements of paragraph (2)(C)(i)(II)
of section 83(i) of the Internal Revenue Code of 1986 (as added
by this section), or the requirements of paragraph (6) of such
section, a corporation shall be treated as being in compliance with
such requirements (respectively) if such corporation complies with
a reasonable good faith interpretation of such requirements.
SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK COMPENSATION OF INSIDERS IN EXPATRIATED CORPORATIONS.
(a) IN GENERAL.—Section 4985(a)(1) is amended by striking
‘‘section 1(h)(1)(C)’’ and inserting ‘‘section 1(h)(1)(D)’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to corporations first becoming expatriated corporations
(as defined in section 4985 of the Internal Revenue Code of 1986)
after the date of enactment of this Act.
26 USC 4985.
26 USC 4985
note.
Subpart B—Retirement Plans
SEC. 13611. REPEAL OF SPECIAL RULE PERMITTING RECHARACTERIZATION OF ROTH CONVERSIONS.
(a) IN GENERAL.—Section 408A(d)(6)(B) is amended by adding
at the end the following new clause:
‘‘(iii) CONVERSIONS.—Subparagraph (A) shall not
apply in the case of a qualified rollover contribution
to which subsection (d)(3) applies (including by reason
of subparagraph (C) thereof).’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 408A
note.
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SEC. 13612. MODIFICATION OF RULES APPLICABLE TO LENGTH OF
SERVICE AWARD PLANS.
(a) MAXIMUM DEFERRAL AMOUNT.—Clause (ii) of section
457(e)(11)(B) is amended by striking ‘‘$3,000’’ and inserting
‘‘$6,000’’.
(b) COST OF LIVING ADJUSTMENT.—Subparagraph (B) of section
457(e)(11) is amended by adding at the end the following:
‘‘(iii) COST OF LIVING ADJUSTMENT.—In the case
of taxable years beginning after December 31, 2017,
the Secretary shall adjust the $6,000 amount under
clause (ii) at the same time and in the same manner
as under section 415(d), except that the base period
shall be the calendar quarter beginning July 1, 2016,
and any increase under this paragraph that is not
a multiple of $500 shall be rounded to the next lowest
multiple of $500.’’.
(c) APPLICATION OF LIMITATION ON ACCRUALS.—Subparagraph
(B) of section 457(e)(11), as amended by subsection (b), is amended
by adding at the end the following:
‘‘(iv) SPECIAL RULE FOR APPLICATION OF LIMITATION
ON ACCRUALS FOR CERTAIN PLANS.—In the case of a
plan described in subparagraph (A)(ii) which is a
defined benefit plan (as defined in section 414(j)), the
limitation under clause (ii) shall apply to the actuarial
present value of the aggregate amount of length of
service awards accruing with respect to any year of
service. Such actuarial present value with respect to
any year shall be calculated using reasonable actuarial
assumptions and methods, assuming payment will be
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26 USC 457 note.
PUBLIC LAW 115–97—DEC. 22, 2017
made under the most valuable form of payment under
the plan with payment commencing at the later of
the earliest age at which unreduced benefits are payable under the plan or the participant’s age at the
time of the calculation.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
SEC. 13613. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN OFFSET
AMOUNTS.
26 USC 402.
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(a) IN GENERAL.—Paragraph (3) of section 402(c) is amended
by adding at the end the following new subparagraph:
‘‘(C) ROLLOVER OF CERTAIN PLAN LOAN OFFSET
AMOUNTS.—
‘‘(i) IN GENERAL.—In the case of a qualified plan
loan offset amount, paragraph (1) shall not apply to
any transfer of such amount made after the due date
(including extensions) for filing the return of tax for
the taxable year in which such amount is treated as
distributed from a qualified employer plan.
‘‘(ii) QUALIFIED PLAN LOAN OFFSET AMOUNT.—For
purposes of this subparagraph, the term ‘qualified plan
loan offset amount’ means a plan loan offset amount
which is treated as distributed from a qualified
employer plan to a participant or beneficiary solely
by reason of—
‘‘(I) the termination of the qualified employer
plan, or
‘‘(II) the failure to meet the repayment terms
of the loan from such plan because of the severance
from employment of the participant.
‘‘(iii) PLAN LOAN OFFSET AMOUNT.—For purposes
of clause (ii), the term ‘plan loan offset amount’ means
the amount by which the participant’s accrued benefit
under the plan is reduced in order to repay a loan
from the plan.
‘‘(iv) LIMITATION.—This subparagraph shall not
apply to any plan loan offset amount unless such plan
loan offset amount relates to a loan to which section
72(p)(1) does not apply by reason of section 72(p)(2).
‘‘(v) QUALIFIED EMPLOYER PLAN.—For purposes of
this subsection, the term ‘qualified employer plan’ has
the meaning given such term by section 72(p)(4).’’.
(b) CONFORMING AMENDMENTS.—Section 402(c)(3) is amended—
(1) by striking ‘‘TRANSFER MUST BE MADE WITHIN 60 DAYS
OF RECEIPT’’ in the heading and inserting ‘‘TIME LIMIT ON TRANSFERS’’, and
(2) by striking ‘‘subparagraph (B)’’ in subparagraph (A)
and inserting ‘‘subparagraphs (B) and (C)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to plan loan offset amounts which are treated as distributed in taxable years beginning after December 31, 2017.
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131 STAT. 2167
PART VIII—EXEMPT ORGANIZATIONS
SEC. 13701. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE
COLLEGES AND UNIVERSITIES.
(a) IN GENERAL.—Chapter 42 is amended by adding at the
end the following new subchapter:
‘‘Subchapter H—Excise Tax Based on Investment Income of
Private Colleges and Universities
26 USC
prec. 4968.
‘‘Sec. 4968. Excise tax based on investment income of private colleges and universities.
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‘‘SEC. 4968. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE
COLLEGES AND UNIVERSITIES.
26 USC 4968.
‘‘(a) TAX IMPOSED.—There is hereby imposed on each applicable
educational institution for the taxable year a tax equal to 1.4
percent of the net investment income of such institution for the
taxable year.
‘‘(b) APPLICABLE EDUCATIONAL INSTITUTION.—For purposes of
this subchapter—
‘‘(1) IN GENERAL.—The term ‘applicable educational institution’ means an eligible educational institution (as defined in
section 25A(f)(2))—
‘‘(A) which had at least 500 students during the preceding taxable year,
‘‘(B) more than 50 percent of the students of which
are located in the United States,
‘‘(C) which is not described in the first sentence of
section 511(a)(2)(B) (relating to State colleges and universities), and
‘‘(D) the aggregate fair market value of the assets
of which at the end of the preceding taxable year (other
than those assets which are used directly in carrying out
the institution’s exempt purpose) is at least $500,000 per
student of the institution.
‘‘(2) STUDENTS.—For purposes of paragraph (1), the number
of students of an institution (including for purposes of determining the number of students at a particular location) shall
be based on the daily average number of full-time students
attending such institution (with part-time students taken into
account on a full-time student equivalent basis).
‘‘(c) NET INVESTMENT INCOME.—For purposes of this section,
net investment income shall be determined under rules similar
to the rules of section 4940(c).
‘‘(d) ASSETS AND NET INVESTMENT INCOME OF RELATED
ORGANIZATIONS.—
‘‘(1) IN GENERAL.—For purposes of subsections (b)(1)(C) and
(c), assets and net investment income of any related organization with respect to an educational institution shall be treated
as assets and net investment income, respectively, of the educational institution, except that—
‘‘(A) no such amount shall be taken into account with
respect to more than 1 educational institution, and
‘‘(B) unless such organization is controlled by such
institution or is described in section 509(a)(3) with respect
to such institution for the taxable year, assets and net
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131 STAT. 2168
PUBLIC LAW 115–97—DEC. 22, 2017
investment income which are not intended or available
for the use or benefit of the educational institution shall
not be taken into account.
‘‘(2) RELATED ORGANIZATION.—For purposes of this subsection, the term ‘related organization’ means, with respect
to an educational institution, any organization which—
‘‘(A) controls, or is controlled by, such institution,
‘‘(B) is controlled by 1 or more persons which also
control such institution, or
‘‘(C) is a supported organization (as defined in section
509(f)(3)), or an organization described in section 509(a)(3),
during the taxable year with respect to such institution.’’.
(b) CLERICAL AMENDMENT.—The table of subchapters for
chapter 42 is amended by adding at the end the following new
item:
26 USC
prec. 4940.
‘‘SUBCHAPTER H—EXCISE
TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES
AND UNIVERSITIES’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 4968
note.
SEC. 13702. UNRELATED BUSINESS TAXABLE INCOME SEPARATELY
COMPUTED FOR EACH TRADE OR BUSINESS ACTIVITY.
26 USC 512.
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(a) IN GENERAL.—Subsection (a) of section 512 is amended
by adding at the end the following new paragraph:
‘‘(6) SPECIAL RULE FOR ORGANIZATION WITH MORE THAN
1 UNRELATED TRADE OR BUSINESS.—In the case of any organization with more than 1 unrelated trade or business—
‘‘(A) unrelated business taxable income, including for
purposes of determining any net operating loss deduction,
shall be computed separately with respect to each such
trade or business and without regard to subsection (b)(12),
‘‘(B) 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 business, less a specific deduction under subsection
(b)(12), and
‘‘(C) for purposes of subparagraph (B), unrelated business taxable income with respect to any such trade or
business shall not be less than zero.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except to the extent provided in paragraph (2), the amendment made by this section shall apply
to taxable years beginning after December 31, 2017.
(2) CARRYOVERS OF NET OPERATING LOSSES.—If any net
operating loss arising in a taxable year beginning before
January 1, 2018, is carried over to a taxable year beginning
on or after such date—
(A) subparagraph (A) of section 512(a)(6) of the Internal
Revenue Code of 1986, as added by this Act, shall not
apply to such net operating loss, and
(B) the unrelated business taxable income of the
organization, after the application of subparagraph (B) of
such section, shall be reduced by the amount of such net
operating loss.
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131 STAT. 2169
SEC. 13703. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY
AMOUNT OF CERTAIN FRINGE BENEFIT EXPENSES FOR
WHICH DEDUCTION IS DISALLOWED.
(a) IN GENERAL.—Section 512(a), as amended by this Act, is
further amended by adding at the end the following new paragraph:
‘‘(7) INCREASE IN UNRELATED BUSINESS TAXABLE INCOME
BY DISALLOWED FRINGE.—Unrelated business taxable income
of an organization shall be increased by any amount for which
a deduction is not allowable under this chapter by reason
of section 274 and which is paid or incurred by such organization for any qualified transportation fringe (as defined in section
132(f)), any parking facility used in connection with qualified
parking (as defined in section 132(f)(5)(C)), or any on-premises
athletic facility (as defined in section 132(j)(4)(B)). The preceding sentence shall not apply to the extent the amount paid
or incurred is directly connected with an unrelated trade or
business which is regularly carried on by the organization.
The Secretary shall issue such regulations or other guidance
as may be necessary or appropriate to carry out the purposes
of this paragraph, including regulations or other guidance providing for the appropriate allocation of depreciation and other
costs with respect to facilities used for parking or for onpremises athletic facilities.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to amounts paid or incurred after December 31, 2017.
26 USC 512.
26 USC 512 note.
SEC. 13704. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN EXCHANGE
FOR COLLEGE ATHLETIC EVENT SEATING RIGHTS.
(a) IN GENERAL.—Section 170(l) is amended—
(1) by striking paragraph (1) and inserting the following:
‘‘(1) IN GENERAL.—No deduction shall be allowed under
this section for any amount described in paragraph (2).’’, and
(2) in paragraph (2)(B), by striking ‘‘such amount would
be allowable as a deduction under this section but for the
fact that’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to contributions made in taxable years beginning after
December 31, 2017.
26 USC 170 note.
SEC. 13705. REPEAL OF SUBSTANTIATION EXCEPTION IN CASE OF CONTRIBUTIONS REPORTED BY DONEE.
(a) IN GENERAL.—Section 170(f)(8) is amended by striking
subparagraph (D) and by redesignating subparagraph (E) as
subparagraph (D).
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to contributions made in taxable years beginning after
December 31, 2016.
26 USC 170 note.
PART IX—OTHER PROVISIONS
Subpart A—Craft Beverage Modernization and
Tax Reform
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SEC. 13801. PRODUCTION PERIOD FOR BEER, WINE, AND DISTILLED
SPIRITS.
(a) IN GENERAL.—Section 263A(f) is amended—
(1) by redesignating paragraph (4) as paragraph (5), and
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131 STAT. 2170
26 USC 263A.
26 USC 263A
note.
PUBLIC LAW 115–97—DEC. 22, 2017
(2) by inserting after paragraph (3) the following new paragraph:
‘‘(4) EXEMPTION FOR AGING PROCESS OF BEER, WINE, AND
DISTILLED SPIRITS.—
‘‘(A) IN GENERAL.—For purposes of this subsection, the
production period shall not include the aging period for—
‘‘(i) beer (as defined in section 5052(a)),
‘‘(ii) wine (as described in section 5041(a)), or
‘‘(iii) distilled spirits (as defined in section
5002(a)(8)), except such spirits that are unfit for use
for beverage purposes.
‘‘(B) TERMINATION.—This paragraph shall not apply
to interest costs paid or accrued after December 31, 2019.’’.
(b) CONFORMING AMENDMENT.—Paragraph (5)(B)(ii) of section
263A(f), as redesignated by this section, is amended by inserting
‘‘except as provided in paragraph (4),’’ before ‘‘ending on the date’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to interest costs paid or accrued in calendar years
beginning after December 31, 2017.
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SEC. 13802. REDUCED RATE OF EXCISE TAX ON BEER.
(a) IN GENERAL.—Paragraph (1) of section 5051(a) is amended
to read as follows:
‘‘(1) IN GENERAL.—
‘‘(A) IMPOSITION OF TAX.—A tax is hereby imposed on
all beer brewed or produced, and removed for consumption
or sale, within the United States, or imported into the
United States. Except as provided in paragraph (2), the
rate of such tax shall be the amount determined under
this paragraph.
‘‘(B) RATE.—Except as provided in subparagraph (C),
the rate of tax shall be $18 for per barrel.
‘‘(C) SPECIAL RULE.—In the case of beer removed after
December 31, 2017, and before January 1, 2020, the rate
of tax shall be—
‘‘(i) $16 on the first 6,000,000 barrels of beer—
‘‘(I) brewed by the brewer and removed during
the calendar year for consumption or sale, or
‘‘(II) imported by the importer into the United
States during the calendar year, and
‘‘(ii) $18 on any barrels of beer to which clause
(i) does not apply.
‘‘(D) BARREL.—For purposes of this section, a barrel
shall contain not more than 31 gallons of beer, and any
tax imposed under this section shall be applied at a like
rate for any other quantity or for fractional parts of a
barrel.’’.
(b) REDUCED RATE FOR CERTAIN DOMESTIC PRODUCTION.—
Subparagraph (A) of section 5051(a)(2) is amended—
(1) in the heading, by striking ‘‘$7 A BARREL’’, and
(2) by inserting ‘‘($3.50 in the case of beer removed after
December 31, 2017, and before January 1, 2020)’’ after ‘‘$7’’.
(c) APPLICATION OF REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND IMPORTERS.—Subsection (a) of section 5051 is
amended—
(1) in subparagraph (C)(i)(II) of paragraph (1), as amended
by subsection (a), by inserting ‘‘but only if the importer is
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131 STAT. 2171
an electing importer under paragraph (4) and the barrels have
been assigned to the importer pursuant to such paragraph’’
after ‘‘during the calendar year’’, and
(2) by adding at the end the following new paragraph:
‘‘(4) REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND
IMPORTERS.—
‘‘(A) 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 States, the rate of
tax applicable under clause (i) of paragraph (1)(C) (referred
to in this paragraph as the ‘reduced tax rate’) may be
assigned by the brewer (provided that the brewer makes
an election described in subparagraph (B)(ii)) to any
electing importer of such barrels pursuant to the requirements established by the Secretary under subparagraph
(B).
‘‘(B) ASSIGNMENT.—The Secretary shall, through such
rules, regulations, and procedures as are determined appropriate, establish procedures for assignment of the reduced
tax rate provided under this paragraph, which shall
include—
‘‘(i) a limitation to ensure that the number of barrels of beer for which the reduced tax rate has been
assigned by a brewer—
‘‘(I) 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 importer,
and
‘‘(II) to all importers does not exceed the
6,000,000 barrels to which the reduced tax rate
applies,
‘‘(ii) procedures that allow the election of a brewer
to assign and an importer to receive the reduced tax
rate provided under this paragraph,
‘‘(iii) requirements that the brewer provide any
information as the Secretary determines necessary and
appropriate for purposes of carrying out this paragraph, and
‘‘(iv) 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 (iii) which the Secretary deems to be
material to qualifying for such reduced rate.
‘‘(C) CONTROLLED GROUP.—For purposes of this section,
any importer making an election described in subparagraph
(B)(ii) shall be deemed to be a member of the controlled
group of the brewer, as described under paragraph (5).’’.
(d) CONTROLLED GROUP AND SINGLE TAXPAYER RULES.—Subsection (a) of section 5051, as amended by this section, is amended—
(1) in paragraph (2)—
(A) by striking subparagraph (B), and
(B) by redesignating subparagraph (C) as subparagraph (B), and
(2) by adding at the end the following new paragraph:
‘‘(5) CONTROLLED GROUP AND SINGLE TAXPAYER RULES.—
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26 USC 5051.
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PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(A) IN GENERAL.—Except as provided in subparagraph
(B), in the case of a controlled group, the 6,000,000 barrel
quantity specified in paragraph (1)(C)(i) and the 2,000,000
barrel quantity specified in paragraph (2)(A) shall be
applied to the controlled group, and the 6,000,000 barrel
quantity specified in paragraph (1)(C)(i) and the 60,000
barrel quantity specified in paragraph (2)(A) shall be apportioned among the brewers who are members of such group
in such manner as the Secretary or their delegate shall
by regulations prescribe. For purposes of the preceding
sentence, the term ‘controlled group’ has the meaning
assigned to it by subsection (a) of section 1563, except
that for such purposes the phrase ‘more than 50 percent’
shall be substituted for the phrase ‘at least 80 percent’
in each place it appears in such subsection. Under regulations prescribed by the Secretary, 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 corporation.
‘‘(B) FOREIGN MANUFACTURERS AND IMPORTERS.—For
purposes of paragraph (4), in the case of a controlled group,
the 6,000,000 barrel quantity specified in paragraph
(1)(C)(i) shall be applied to the controlled group and apportioned among the members of such group in such manner
as the Secretary shall by regulations prescribe. For purposes of the preceding sentence, the term ‘controlled group’
has the meaning given such term under subparagraph
(A). Under regulations prescribed by the Secretary, 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 corporation.
‘‘(C) SINGLE TAXPAYER.—Pursuant to rules issued by
the Secretary, two or more entities (whether or not under
common control) that produce beer marketed under a
similar brand, license, franchise, or other arrangement
shall be treated as a single taxpayer for purposes of the
application of this subsection.’’.
(e) EFFECTIVE DATE.—The amendments made by this section
shall apply to beer removed after December 31, 2017.
26 USC 5051
note.
SEC. 13803. TRANSFER OF BEER BETWEEN BONDED FACILITIES.
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26 USC 5414.
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(a) IN GENERAL.—Section 5414 is amended—
(1) by striking ‘‘Beer may be removed’’ and inserting ‘‘(a)
IN GENERAL.—Beer may be removed’’, and
(2) by adding at the end the following:
‘‘(b) TRANSFER OF BEER BETWEEN BONDED FACILITIES.—
‘‘(1) IN GENERAL.—Beer may be removed from one bonded
brewery to another bonded brewery, without payment of tax,
and may be mingled with beer at the receiving brewery, subject
to such conditions, including payment of the tax, and in such
containers, as the Secretary by regulations shall prescribe,
which shall include—
‘‘(A) any removal from one brewery to another brewery
belonging to the same brewer,
‘‘(B) any removal from a brewery owned by one corporation to a brewery owned by another corporation when—
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131 STAT. 2173
‘‘(i) one such corporation owns the controlling
interest in the other such corporation, or
‘‘(ii) the controlling interest in each such corporation is owned by the same person or persons, and
‘‘(C) any removal from one brewery to another brewery
when—
‘‘(i) the proprietors of transferring and receiving
premises are independent of each other and neither
has a proprietary interest, directly or indirectly, in
the business of the other, and
‘‘(ii) the transferor has divested itself of all interest
in the beer so transferred and the transferee has
accepted responsibility for payment of the tax.
‘‘(2) TRANSFER OF LIABILITY FOR TAX.—For purposes of paragraph (1)(C), such relief from liability shall be effective from
the time of removal from the transferor’s bonded premises,
or from the time of divestment of interest, whichever is later.
‘‘(3) TERMINATION.—This subsection shall not apply to any
calendar quarter beginning after December 31, 2019.’’.
(b) REMOVAL FROM BREWERY BY PIPELINE.—Section 5412 is
amended by inserting ‘‘pursuant to section 5414 or’’ before ‘‘by
pipeline’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to any calendar quarters beginning after December
31, 2017.
26 USC 5412.
26 USC 5412
note.
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SEC. 13804. REDUCED RATE OF EXCISE TAX ON CERTAIN WINE.
(a) IN GENERAL.—Section 5041(c) is amended by adding at
the end the following new paragraph:
‘‘(8) SPECIAL RULE FOR 2018 AND 2019.—
‘‘(A) IN GENERAL.—In the case of wine removed after
December 31, 2017, and before January 1, 2020, paragraphs
(1) and (2) shall not apply and there shall be allowed
as a credit against any tax imposed by this title (other
than chapters 2, 21, and 22) an amount equal to the
sum of—
‘‘(i) $1 per wine gallon on the first 30,000 wine
gallons of wine, plus
‘‘(ii) 90 cents per wine gallon on the first 100,000
wine gallons of wine to which clause (i) does not apply,
plus
‘‘(iii) 53.5 cents per wine gallon on the first 620,000
wine gallons of wine to which clauses (i) and (ii) do
not apply,
which are produced by the producer and removed during
the calendar year for consumption or sale, or which are
imported by the importer into the United States during
the calendar year.
‘‘(B) ADJUSTMENT OF CREDIT FOR HARD CIDER.—In the
case of wine described in subsection (b)(6), subparagraph
(A) of this paragraph shall be applied—
‘‘(i) in clause (i) of such subparagraph, by substituting ‘6.2 cents’ for ‘$1’,
‘‘(ii) in clause (ii) of such subparagraph, by substituting ‘5.6 cents’ for ‘90 cents’, and
‘‘(iii) in clause (iii) of such subparagraph, by substituting ‘3.3 cents’ for ‘53.5 cents’.’’,
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26 USC 5041.
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PUBLIC LAW 115–97—DEC. 22, 2017
(b) CONTROLLED GROUP AND SINGLE TAXPAYER RULES.—Paragraph (4) of section 5041(c) is amended by striking ‘‘section
5051(a)(2)(B)’’ and inserting ‘‘section 5051(a)(5)’’.
(c) ALLOWANCE OF CREDIT FOR FOREIGN MANUFACTURERS AND
IMPORTERS.—Subsection (c) of section 5041, as amended by subsection (a), is amended—
(1) in subparagraph (A) of paragraph (8), by inserting ‘‘but
only if the importer is an electing importer under paragraph
(9) and the wine gallons of wine have been assigned to the
importer pursuant to such paragraph’’ after ‘‘into the United
States during the calendar year’’, and
(2) by adding at the end the following new paragraph:
‘‘(9) ALLOWANCE OF CREDIT FOR FOREIGN MANUFACTURERS
AND IMPORTERS.—
‘‘(A) 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 States, the credit
allowable under paragraph (8) (referred to in this paragraph as the ‘tax credit’) may be assigned by the person
who produced such wine (referred to in this paragraph
as the ‘foreign producer’), provided that such person makes
an election described in subparagraph (B)(ii), to any
electing importer of such wine gallons pursuant to the
requirements established by the Secretary under subparagraph (B).
‘‘(B) ASSIGNMENT.—The Secretary shall, through such
rules, regulations, and procedures as are determined appropriate, establish procedures for assignment of the tax credit
provided under this paragraph, which shall include—
‘‘(i) a limitation to ensure that the number of wine
gallons of wine for which the tax credit has been
assigned by a foreign producer—
‘‘(I) 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
importer, and
‘‘(II) to all importers does not exceed the
750,000 wine gallons of wine to which the tax
credit applies,
‘‘(ii) procedures that allow the election of a foreign
producer to assign and an importer to receive the tax
credit provided under this paragraph,
‘‘(iii) requirements that the foreign producer provide any information as the Secretary determines necessary and appropriate for purposes of carrying out
this paragraph, and
‘‘(iv) 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 (iii) which the Secretary deems
to be material to qualifying for such credit.
‘‘(C) CONTROLLED GROUP.—For purposes of this section,
any importer making an election described in subparagraph
(B)(ii) shall be deemed to be a member of the controlled
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131 STAT. 2175
group of the foreign producer, as described under paragraph
(4).’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to wine removed after December 31, 2017.
26 USC 5401
note.
SEC. 13805. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR APPLICATION OF EXCISE TAX RATES.
(a) IN GENERAL.—Paragraphs (1) and (2) of section 5041(b)
are each amended by inserting ‘‘(16 percent in the case of wine
removed after December 31, 2017, and before January 1, 2020’’
after ‘‘14 percent’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to wine removed after December 31, 2017.
26 USC 5041.
26 USC 5401
note.
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SEC. 13806. DEFINITION OF MEAD AND LOW ALCOHOL BY VOLUME
WINE.
(a) IN GENERAL.—Section 5041 is amended—
(1) in subsection (a), by striking ‘‘Still wines’’ and inserting
‘‘Subject to subsection (h), still wines’’, and
(2) by adding at the end the following new subsection:
‘‘(h) MEAD AND LOW ALCOHOL BY VOLUME WINE.—
‘‘(1) IN GENERAL.—For purposes of subsections (a) and
(b)(1), mead and low alcohol by volume wine shall be deemed
to be still wines containing not more than 16 percent of alcohol
by volume.
‘‘(2) DEFINITIONS.—
‘‘(A) MEAD.—For purposes of this section, the term
‘mead’ means a wine—
‘‘(i) containing not more than 0.64 gram of carbon
dioxide per hundred milliliters of wine, except that
the Secretary shall by regulations prescribe such tolerances to this limitation as may be reasonably necessary
in good commercial practice,
‘‘(ii) which is derived solely from honey and water,
‘‘(iii) which contains no fruit product or fruit flavoring, and
‘‘(iv) which contains less than 8.5 percent alcohol
by volume.
‘‘(B) LOW ALCOHOL BY VOLUME WINE.—For purposes
of this section, the term ‘low alcohol by volume wine’ means
a wine—
‘‘(i) containing not more than 0.64 gram of carbon
dioxide per hundred milliliters of wine, except that
the Secretary shall by regulations prescribe such tolerances to this limitation as may be reasonably necessary
in good commercial practice,
‘‘(ii) which is derived—
‘‘(I) primarily from grapes, or
‘‘(II) from grape juice concentrate and water,
‘‘(iii) which contains no fruit product or fruit flavoring other than grape, and
‘‘(iv) which contains less than 8.5 percent alcohol
by volume.
‘‘(3) TERMINATION.—This subsection shall not apply to wine
removed after December 31, 2019.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to wine removed after December 31, 2017.
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131 STAT. 2176
PUBLIC LAW 115–97—DEC. 22, 2017
SEC. 13807. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED
SPIRITS.
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26 USC 5001.
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(a) IN GENERAL.—Section 5001 is amended by redesignating
subsection (c) as subsection (d) and by inserting after subsection
(b) the following new subsection:
‘‘(c) REDUCED RATE FOR 2018 AND 2019.—
‘‘(1) IN GENERAL.—In the case of a distilled spirits operation, the otherwise applicable tax rate under subsection (a)(1)
shall be—
‘‘(A) $2.70 per proof gallon on the first 100,000 proof
gallons of distilled spirits, and
‘‘(B) $13.34 per proof gallon on the first 22,130,000
of proof gallons of distilled spirits to which subparagraph
(A) does not apply,
which have been distilled or processed by such operation and
removed during the calendar year for consumption or sale,
or which have been imported by the importer into the United
States during the calendar year.
‘‘(2) CONTROLLED GROUPS.—
‘‘(A) IN GENERAL.—In the case of a controlled group,
the proof gallon quantities specified under subparagraphs
(A) and (B) of paragraph (1) 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 prescribe.
‘‘(B) DEFINITION.—For purposes of subparagraph (A),
the term ‘controlled group’ shall have the meaning given
such term by subsection (a) of section 1563, except that
‘more than 50 percent’ shall be substituted for ‘at least
80 percent’ each place it appears in such subsection.
‘‘(C) RULES FOR NON-CORPORATIONS.—Under regulations prescribed by the Secretary, principles similar to the
principles of subparagraphs (A) and (B) shall be applied
to a group under common control where one or more of
the persons is not a corporation.
‘‘(D) SINGLE TAXPAYER.—Pursuant to rules issued by
the Secretary, two or more entities (whether or not under
common control) that produce distilled spirits marketed
under a similar brand, license, franchise, or other arrangement shall be treated as a single taxpayer for purposes
of the application of this subsection.
‘‘(3) TERMINATION.—This subsection shall not apply to distilled spirits removed after December 31, 2019.’’.
(b) CONFORMING AMENDMENT.—Section 7652(f)(2) is amended
by striking ‘‘section 5001(a)(1)’’ and inserting ‘‘subsection (a)(1) of
section 5001, determined as if subsection (c)(1) of such section
did not apply’’.
(c) APPLICATION OF REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND IMPORTERS.—Subsection (c) of section 5001, as added
by subsection (a), is amended—
(1) in paragraph (1), by inserting ‘‘but only if the importer
is an electing importer under paragraph (3) 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 year’’, and
(2) by redesignating paragraph (3) as paragraph (4) and
by inserting after paragraph (2) the following new paragraph:
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2177
‘‘(3) REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND
IMPORTERS.—
‘‘(A) 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 States,
the rate of tax applicable under paragraph (1) (referred
to in this paragraph as the ‘reduced tax rate’) may be
assigned by the distilled spirits operation (provided that
such operation makes an election described in subparagraph (B)(ii)) to any electing importer of such proof gallons
pursuant to the requirements established by the Secretary
under subparagraph (B).
‘‘(B) ASSIGNMENT.—The Secretary shall, through such
rules, regulations, and procedures as are determined appropriate, establish procedures for assignment of the reduced
tax rate provided under this paragraph, which shall
include—
‘‘(i) 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—
‘‘(I) 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 importer,
and
‘‘(II) to all importers does not exceed the
22,230,000 proof gallons of distilled spirits to which
the reduced tax rate applies,
‘‘(ii) procedures that allow the election of a distilled
spirits operation to assign and an importer to receive
the reduced tax rate provided under this paragraph,
‘‘(iii) requirements that the distilled spirits operation provide any information as the Secretary determines necessary and appropriate for purposes of carrying out this paragraph, and
‘‘(iv) 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 (iii) which the Secretary deems
to be material to qualifying for such reduced rate.
‘‘(C) CONTROLLED GROUP.—
‘‘(i) IN GENERAL.—For purposes of this section, any
importer making an election described in subparagraph
(B)(ii) shall be deemed to be a member of the controlled
group of the distilled spirits operation, as described
under paragraph (2).
‘‘(ii) APPORTIONMENT.—For purposes of this paragraph, in the case of a controlled group, rules similar
to section 5051(a)(5)(B) shall apply.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to distilled spirits removed after December 31, 2017.
26 USC 5001
note.
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SEC. 13808. BULK DISTILLED SPIRITS.
(a) IN GENERAL.—Section 5212 is amended by adding at the
end the following sentence: ‘‘In the case of distilled spirits transferred in bond after December 31, 2017, and before January 1,
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26 USC 5212.
PUBL097
131 STAT. 2178
PUBLIC LAW 115–97—DEC. 22, 2017
2020, this section shall be applied without regard to whether distilled spirits are bulk distilled spirits.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply distilled spirits transferred in bond after December
31, 2017.
26 USC 5212
note.
Subpart B—Miscellaneous Provisions
SEC. 13821. MODIFICATION OF TAX TREATMENT OF ALASKA NATIVE
CORPORATIONS AND SETTLEMENT TRUSTS.
(a) EXCLUSION FOR ANCSA PAYMENTS ASSIGNED TO ALASKA
NATIVE SETTLEMENT TRUSTS.—
(1) IN GENERAL.—Part III of subchapter B of chapter 1
is amended by inserting before section 140 the following new
section:
26 USC 139G.
‘‘SEC. 139G. ASSIGNMENTS TO ALASKA NATIVE SETTLEMENT TRUSTS.
26 USC
prec. 101.
‘‘(a) IN GENERAL.—In the case of a Native Corporation, gross
income shall not include the value of any payments that would
otherwise be made, or treated as being made, to such Native Corporation pursuant to, or as required by, any provision of the Alaska
Native Claims Settlement Act (43 U.S.C. 1601 et seq.), including
any payment that would otherwise be made to a Village Corporation
pursuant to section 7(j) of the Alaska Native Claims Settlement
Act (43 U.S.C. 1606(j)), provided that any such payments—
‘‘(1) are assigned in writing to a Settlement Trust, and
‘‘(2) were not received by such Native Corporation prior
to the assignment described in paragraph (1).
‘‘(b) INCLUSION IN GROSS INCOME.—In the case of a Settlement
Trust which has been assigned payments described in subsection
(a), 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 Corporation.
‘‘(c) AMOUNT AND SCOPE OF ASSIGNMENT.—The amount and
scope of any assignment under subsection (a) shall be described
with reasonable particularity and may either be in a percentage
of one or more such payments or in a fixed dollar amount.
‘‘(d) DURATION OF ASSIGNMENT; REVOCABILITY.—Any assignment under subsection (a) shall specify—
‘‘(1) a duration either in perpetuity or for a period of
time, and
‘‘(2) whether such assignment is revocable.
‘‘(e) PROHIBITION ON DEDUCTION.—Notwithstanding section 247,
no deduction shall be allowed to a Native Corporation for purposes
of any amounts described in subsection (a).
‘‘(f) DEFINITIONS.—For purposes of this section, the terms
‘Native Corporation’ and ‘Settlement Trust’ have the same meaning
given such terms under section 646(h).’’.
(2) CONFORMING AMENDMENT.—The table of sections for
part III of subchapter B of chapter 1 is amended by inserting
before the item relating to section 140 the following new item:
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‘‘Sec. 139G. Assignments to Alaska Native Settlement Trusts.’’.
(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years beginning after December
31, 2016.
26 USC 139G
note.
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2179
(b) DEDUCTION OF CONTRIBUTIONS TO ALASKA NATIVE SETTLETRUSTS.—
(1) IN GENERAL.—Part VIII of subchapter B of chapter
1 is amended by inserting before section 248 the following
new section:
MENT
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‘‘SEC. 247. CONTRIBUTIONS TO ALASKA NATIVE SETTLEMENT TRUSTS.
26 USC 247.
‘‘(a) IN GENERAL.—In the case of a Native Corporation, there
shall be allowed a deduction for any contributions made by such
Native Corporation to a Settlement Trust (regardless of whether
an election under section 646 is in effect for such Settlement Trust)
for which the Native Corporation has made an annual election
under subsection (e).
‘‘(b) AMOUNT OF DEDUCTION.—The amount of the deduction
under subsection (a) shall be equal to—
‘‘(1) in the case of a cash contribution (regardless of the
method of payment, including currency, coins, money order,
or check), the amount of such contribution, or
‘‘(2) in the case of a contribution not described in paragraph
(1), the lesser of—
‘‘(A) the Native Corporation’s adjusted basis in the
property contributed, or
‘‘(B) the fair market value of the property contributed.
‘‘(c) LIMITATION AND CARRYOVER.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), the deduction
allowed under subsection (a) for any taxable year shall not
exceed the taxable income (as determined without regard to
such deduction) of the Native Corporation for the taxable year
in which the contribution was made.
‘‘(2) CARRYOVER.—If the aggregate amount of contributions
described in subsection (a) for any taxable year exceeds the
limitation under paragraph (1), such excess shall be treated
as a contribution described in subsection (a) in each of the
15 succeeding years in order of time.
‘‘(d) DEFINITIONS.—For purposes of this section, the terms
‘Native Corporation’ and ‘Settlement Trust’ have the same meaning
given such terms under section 646(h).
‘‘(e) MANNER OF MAKING ELECTION.—
‘‘(1) IN GENERAL.—For each taxable year, 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 Corporation, with such election
to have effect solely for such taxable year.
‘‘(2) REVOCATION.—Any election made by a Native Corporation pursuant to this subsection may be revoked pursuant
to a timely filed amendment or supplement to the income
tax return of such Native Corporation.
‘‘(f) ADDITIONAL RULES.—
‘‘(1) EARNINGS AND PROFITS.—Notwithstanding section
646(d)(2), in the case of a Native Corporation which claims
a deduction under this section for any taxable year, the earnings
and profits of such Native Corporation for such taxable year
shall be reduced by the amount of such deduction.
‘‘(2) 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 section.
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131 STAT. 2180
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(3) INCOME.—Subject to subsection (g), 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 contribution.
‘‘(4) PERIOD.—The holding period under section 1223 of
the Settlement Trust shall include the period the property
was held by the Native Corporation.
‘‘(5) BASIS.—The basis that a Settlement Trust has for
which a deduction is allowed under this section shall be equal
to the lesser of—
‘‘(A) the adjusted basis of the Native Corporation in
such property immediately before such contribution, or
‘‘(B) the fair market value of the property immediately
before such contribution.
‘‘(6) 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 (a)(2) or (c)(2)
of section 39 of the Alaska Native Claims Settlement Act (43
U.S.C. 1629e).
‘‘(g) ELECTION BY SETTLEMENT TRUST TO DEFER INCOME RECOGNITION.—
‘‘(1) IN GENERAL.—In the case of a contribution which consists of property other than cash, a Settlement Trust may
elect to defer recognition of any income related to such property
until the sale or exchange of such property, in whole or in
part, by the Settlement Trust.
‘‘(2) TREATMENT.—In the case of property described in paragraph (1), any income or gain realized on the sale or exchange
of such property shall be treated as—
‘‘(A) 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 (f)(3) but for the taxpayer’s election under this
subsection, ordinary income, and
‘‘(B) 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 (f)(3) but for the taxpayer’s election under this
subsection, having the same character as if this subsection
did not apply.
‘‘(3) ELECTION.—
‘‘(A) IN GENERAL.—For each taxable year, a Settlement
Trust may elect to apply this subsection for any property
described in paragraph (1) which was contributed during
such year. 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 Trust, with such election
to have effect solely for such taxable year.
‘‘(B) REVOCATION.—Any election made by a Settlement
Trust pursuant to this subsection may be revoked pursuant
to a timely filed amendment or supplement to the income
tax return of such Settlement Trust.
‘‘(C) CERTAIN DISPOSITIONS.—
‘‘(i) 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
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131 STAT. 2181
subsequent to the taxable year in which such property
was contributed to the Settlement Trust—
‘‘(I) this section shall be applied as if the election under this subsection had not been made,
‘‘(II) any income or gain which would have
been included in the year of contribution under
subsection (f)(3) but for the taxpayer’s election
under this subsection shall be included in income
for the taxable year of such contribution, and
‘‘(III) the Settlement Trust shall pay any
increase in tax resulting from such inclusion,
including any applicable interest, and increased
by 10 percent of the amount of such increase with
interest.
section
‘‘(ii)
ASSESSMENT.—Notwithstanding
6501(a), any amount described in subclause (III) of
clause (i) may be assessed, or a proceeding in court
with respect to such amount may be initiated without
assessment, within 4 years after the date on which
the return making the election under this subsection
for such property was filed.’’.
(2) CONFORMING AMENDMENT.—The table of sections for
part VIII of subchapter B of chapter 1 is amended by inserting
before the item relating to section 248 the following new item:
26 USC
prec. 241.
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‘‘Sec. 247. Contributions to Alaska Native Settlement Trusts.’’.
(3) EFFECTIVE DATE.—
(A) 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 6511 of
the Internal Revenue Code of 1986 has not expired.
(B) ONE-YEAR WAIVER OF STATUTE OF LIMITATIONS.—
If the period of limitation on a credit or refund resulting
from the amendments made by paragraph (1) expires before
the end of the 1-year period beginning on the date of
the enactment of this Act, refund or credit of such overpayment (to the extent attributable to such amendments) may,
nevertheless, be made or allowed if claim therefor is filed
before the close of such 1-year period.
(c) INFORMATION REPORTING FOR DEDUCTIBLE CONTRIBUTIONS
TO ALASKA NATIVE SETTLEMENT TRUSTS.—
(1) IN GENERAL.—Section 6039H is amended—
(A) in the heading, by striking ‘‘SPONSORING’’, and
(B) by adding at the end the following new subsection:
‘‘(e) DEDUCTIBLE CONTRIBUTIONS BY NATIVE CORPORATIONS TO
ALASKA NATIVE SETTLEMENT TRUSTS.—
‘‘(1) IN GENERAL.—Any Native Corporation (as defined in
subsection (m) of section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m))) which has made a contribution
to a Settlement Trust (as defined in subsection (t) of such
section) to which an election under subsection (e) of section
247 applies shall provide such Settlement Trust with a statement regarding such election not later than January 31 of
the calendar year subsequent to the calendar year in which
the contribution was made.
‘‘(2) CONTENT OF STATEMENT.—The statement described in
paragraph (1) shall include—
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26 USC 247 note.
26 USC 6039H.
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131 STAT. 2182
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(A) the total amount of contributions to which the
election under subsection (e) of section 247 applies,
‘‘(B) for each contribution, whether such contribution
was in cash,
‘‘(C) for each contribution which consists of property
other than cash, the date that such property was acquired
by the Native Corporation and the adjusted basis and
fair market value of such property on the date such property was contributed to the Settlement Trust,
‘‘(D) the date on which each contribution was made
to the Settlement Trust, and
‘‘(E) 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 Trust.’’.
(2) CONFORMING AMENDMENT.—The item relating to section
6039H in the table of sections for subpart A of part III of
subchapter A of chapter 61 is amended to read as follows:
26 USC
prec. 6031.
‘‘Sec. 6039H. Information With Respect to Alaska Native Settlement Trusts and
Native Corporations.’’.
(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years beginning after December
31, 2016.
26 USC 6039H
note.
SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES.
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26 USC 4261.
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(a) IN GENERAL.—Subsection (e) of section 4261 is amended
by adding at the end the following new paragraph:
‘‘(5) AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES.—
‘‘(A) IN GENERAL.—No tax shall be imposed by this
section or section 4271 on any amounts paid by an aircraft
owner for aircraft management services related to—
‘‘(i) maintenance and support of the aircraft
owner’s aircraft, or
‘‘(ii) flights on the aircraft owner’s aircraft.
‘‘(B) AIRCRAFT MANAGEMENT SERVICES.—For purposes
of subparagraph (A), the term ‘aircraft management services’ includes—
‘‘(i) assisting an aircraft owner with administrative
and support services, such as scheduling, flight planning, and weather forecasting,
‘‘(ii) obtaining insurance,
‘‘(iii) maintenance, storage and fueling of aircraft,
‘‘(iv) hiring, training, and provision of pilots and
crew,
‘‘(v) establishing and complying with safety standards, and
‘‘(vi) such other services as are necessary to support flights operated by an aircraft owner.
‘‘(C) LESSEE TREATED AS AIRCRAFT OWNER.—
‘‘(i) IN GENERAL.—For purposes of this paragraph,
the term ‘aircraft owner’ includes a person who leases
the aircraft other than under a disqualified lease.
‘‘(ii) DISQUALIFIED LEASE.—For purposes of clause
(i), the term ‘disqualified lease’ means a lease from
a person providing aircraft management services with
respect to such aircraft (or a related person (within
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131 STAT. 2183
the meaning of section 465(b)(3)(C)) to the person providing such services), if such lease is for a term of
31 days or less.
‘‘(D) PRO RATA ALLOCATION.—In the case of amounts
paid to any person which (but for this subsection) are
subject to the tax imposed by subsection (a), a portion
of which consists of amounts described in subparagraph
(A), this paragraph shall apply on a pro rata basis only
to the portion which consists of amounts described in such
subparagraph.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to amounts paid after the date of the enactment of
this Act.
26 USC 4261
note.
SEC. 13823. OPPORTUNITY ZONES.
(a) IN GENERAL.—Chapter 1 is amended by adding at the
end the following:
‘‘Subchapter Z—Opportunity Zones
26 USC
prec. 1400Z–1.
‘‘Sec. 1400Z–1. Designation.
‘‘Sec. 1400Z–2. Special rules for capital gains invested in opportunity zones.
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‘‘SEC. 1400Z–1. DESIGNATION.
26 USC 1400Z–1.
‘‘(a) QUALIFIED OPPORTUNITY ZONE DEFINED.—For the purposes
of this subchapter, the term ‘qualified opportunity zone’ means
a population census tract that is a low-income community that
is designated as a qualified opportunity zone.
‘‘(b) DESIGNATION.—
‘‘(1) IN GENERAL.—For purposes of subsection (a), a population census tract that is a low-income community is designated as a qualified opportunity zone if—
‘‘(A) not later than the end of the determination period,
the chief executive officer of the State in which the tract
is located—
‘‘(i) nominates the tract for designation as a qualified opportunity zone, and
‘‘(ii) notifies the Secretary in writing of such
nomination, and
‘‘(B) the Secretary certifies such nomination and designates such tract as a qualified opportunity zone before
the end of the consideration period.
‘‘(2) EXTENSION OF PERIODS.—A chief executive officer of
a State may request that the Secretary extend either the determination or consideration period, or both (determined without
regard to this subparagraph), for an additional 30 days.
‘‘(c) OTHER DEFINITIONS.—For purposes of this subsection—
‘‘(1) LOW-INCOME COMMUNITIES.—The term ‘low-income
community’ has the same meaning as when used in section
45D(e).
‘‘(2) DEFINITION OF PERIODS.—
‘‘(A) CONSIDERATION PERIOD.—The term ‘consideration
period’ means the 30-day period beginning on the date
on which the Secretary receives notice under subsection
(b)(1)(A)(ii), as extended under subsection (b)(2).
‘‘(B) DETERMINATION PERIOD.—The term ‘determination
period’ means the 90-day period beginning on the date
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131 STAT. 2184
PUBLIC LAW 115–97—DEC. 22, 2017
of the enactment of the Tax Cuts and Jobs Act, as extended
under subsection (b)(2).
‘‘(3) STATE.—For purposes of this section, the term ‘State’
includes any possession of the United States.
‘‘(d) NUMBER OF DESIGNATIONS.—
‘‘(1) IN GENERAL.—Except as provided by paragraph (2),
the number of population census tracts in a State that may
be designated as qualified opportunity zones under this section
may not exceed 25 percent of the number of low-income communities in the State.
‘‘(2) EXCEPTION.—If the number of low-income communities
in a State is less than 100, then a total of 25 of such tracts
may be designated as qualified opportunity zones.
‘‘(e) DESIGNATION OF TRACTS CONTIGUOUS WITH LOW-INCOME
COMMUNITIES.—
‘‘(1) 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—
‘‘(A) the tract is contiguous with the low-income
community that is designated as a qualified opportunity
zone, and
‘‘(B) the median family income of the tract does not
exceed 125 percent of the median family income of the
low-income community with which the tract is contiguous.
‘‘(2) LIMITATION.—Not more than 5 percent of the population census tracts designated in a State as a qualified opportunity zone may be designated under paragraph (1).
‘‘(f) 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 10th calendar year beginning on or after such
date of designation.
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26 USC 1400Z–2.
‘‘SEC. 1400Z–2. SPECIAL RULES FOR CAPITAL GAINS INVESTED IN
OPPORTUNITY ZONES.
‘‘(a) IN GENERAL.—
‘‘(1) TREATMENT OF GAINS.—In the case of gain from the
sale to, or exchange with, an unrelated person of any property
held by the taxpayer, at the election of the taxpayer—
‘‘(A) 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 180-day period beginning on the date of
such sale or exchange,
‘‘(B) the amount of gain excluded by subparagraph
(A) shall be included in gross income as provided by subsection (b), and
‘‘(C) subsection (c) shall apply.
‘‘(2) ELECTION.—No election may be made under paragraph
(1)—
‘‘(A) with respect to a sale or exchange if an election
previously made with respect to such sale or exchange
is in effect, or
‘‘(B) with respect to any sale or exchange after
December 31, 2026.
‘‘(b) DEFERRAL OF GAIN INVESTED IN OPPORTUNITY ZONE PROPERTY.—
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131 STAT. 2185
‘‘(1) YEAR OF INCLUSION.—Gain to which subsection
(a)(1)(B) applies shall be included in income in the taxable
year which includes the earlier of—
‘‘(A) the date on which such investment is sold or
exchanged, or
‘‘(B) December 31, 2026.
‘‘(2) AMOUNT INCLUDIBLE.—
‘‘(A) IN GENERAL.—The amount of gain included in
gross income under subsection (a)(1)(A) shall be the excess
of—
‘‘(i) the lesser of the amount of gain excluded under
paragraph (1) or the fair market value of the investment as determined as of the date described in paragraph (1), over
‘‘(ii) the taxpayer’s basis in the investment.
‘‘(B) DETERMINATION OF BASIS.—
‘‘(i) IN GENERAL.—Except as otherwise provided
in this clause or subsection (c), the taxpayer’s basis
in the investment shall be zero.
‘‘(ii) INCREASE FOR GAIN RECOGNIZED UNDER SUBSECTION (a)(1)(B).—The basis in the investment shall
be increased by the amount of gain recognized by reason of subsection (a)(1)(B) with respect to such property.
‘‘(iii) INVESTMENTS HELD FOR 5 YEARS.—In the case
of any investment held for at least 5 years, the basis
of such investment shall be increased by an amount
equal to 10 percent of the amount of gain deferred
by reason of subsection (a)(1)(A).
‘‘(iv) INVESTMENTS HELD FOR 7 YEARS.—In the case
of any investment held by the taxpayer for at least
7 years, in addition to any adjustment made under
clause (iii), the basis of such property shall be increased
by an amount equal to 5 percent of the amount of
gain deferred by reason of subsection (a)(1)(A).
‘‘(c) SPECIAL RULE FOR INVESTMENTS HELD FOR AT LEAST 10
YEARS.—In the case of any investment held by the taxpayer for
at least 10 years and with respect to which the taxpayer makes
an election under this clause, 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 exchanged.
‘‘(d) QUALIFIED OPPORTUNITY FUND.—For purposes of this section—
‘‘(1) IN GENERAL.—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 (other than another qualified opportunity fund) that holds at least 90 percent of its assets in
qualified opportunity zone property, determined by the average
of the percentage of qualified opportunity zone property held
in the fund as measured—
‘‘(A) on the last day of the first 6-month period of
the taxable year of the fund, and
‘‘(B) on the last day of the taxable year of the fund.
‘‘(2) QUALIFIED OPPORTUNITY ZONE PROPERTY.—
‘‘(A) IN GENERAL.—The term ‘qualified opportunity zone
property’ means property which is—
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131 STAT. 2186
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(i) qualified opportunity zone stock,
‘‘(ii) qualified opportunity zone partnership
interest, or
‘‘(iii) qualified opportunity zone business property.
‘‘(B) QUALIFIED OPPORTUNITY ZONE STOCK.—
‘‘(i) IN GENERAL.—Except as provided in clause
(ii), the term ‘qualified opportunity zone stock’ means
any stock in a domestic corporation if—
‘‘(I) such stock is acquired by the qualified
opportunity fund after December 31, 2017, at its
original issue (directly or through an underwriter)
from the corporation solely in exchange for cash,
‘‘(II) as of the time such stock was issued,
such corporation was a qualified opportunity zone
business (or, in the case of a new corporation,
such corporation was being organized for purposes
of being a qualified opportunity zone business),
and
‘‘(III) during substantially all of the qualified
opportunity fund’s holding period for such stock,
such corporation qualified as a qualified opportunity zone business.
‘‘(ii) REDEMPTIONS.—A rule similar to the rule of
section 1202(c)(3) shall apply for purposes of this paragraph.
‘‘(C) QUALIFIED OPPORTUNITY ZONE PARTNERSHIP
INTEREST.—The term ‘qualified opportunity zone partnership interest’ means any capital or profits interest in a
domestic partnership if—
‘‘(i) such interest is acquired by the qualified opportunity fund after December 31, 2017, from the partnership solely in exchange for cash,
‘‘(ii) as of the time such interest was acquired,
such partnership was a qualified opportunity zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being a qualified opportunity zone business), and
‘‘(iii) during substantially all of the qualified opportunity fund’s holding period for such interest, such
partnership qualified as a qualified opportunity zone
business.
‘‘(D) QUALIFIED OPPORTUNITY ZONE BUSINESS PROPERTY.—
‘‘(i) IN GENERAL.—The term ‘qualified opportunity
zone business property’ means tangible property used
in a trade or business of the qualified opportunity
fund if—
‘‘(I) such property was acquired by the qualified opportunity fund by purchase (as defined in
section 179(d)(2)) after December 31, 2017,
‘‘(II) the original use of such property in the
qualified opportunity zone commences with the
qualified opportunity fund or the qualified opportunity fund substantially improves the property,
and
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2187
‘‘(III) during substantially all of the qualified
opportunity fund’s holding period for such property, substantially all of the use of such property
was in a qualified opportunity zone.
‘‘(ii) SUBSTANTIAL IMPROVEMENT.—For purposes of
subparagraph (A)(ii), property shall be treated as
substantially improved by the qualified opportunity
fund only if, during any 30-month period beginning
after the date of acquisition of such property, additions
to basis with respect to such property in the hands
of the qualified opportunity fund exceed an amount
equal to the adjusted basis of such property at the
beginning of such 30-month period in the hands of
the qualified opportunity fund.
‘‘(iii) RELATED PARTY.—For purposes of subparagraph (A)(i), the related person rule of section 179(d)(2)
shall be applied pursuant to paragraph (8) of this
subsection in lieu of the application of such rule in
section 179(d)(2)(A).
‘‘(3) QUALIFIED OPPORTUNITY ZONE BUSINESS.—
‘‘(A) IN GENERAL.—The term ‘qualified opportunity zone
business’ means a trade or business—
‘‘(i) in which substantially all of the tangible property owned or leased by the taxpayer is qualified opportunity zone business property (determined by substituting ‘qualified opportunity zone business’ for
‘qualified opportunity fund’ each place it appears in
paragraph (2)(D)),
‘‘(ii) which satisfies the requirements of paragraphs
(2), (4), and (8) of section 1397C(b), and
‘‘(iii) which is not described in section 144(c)(6)(B).
‘‘(B) SPECIAL RULE.—For purposes of subparagraph (A),
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—
‘‘(i) 5 years after the date on which such tangible
property ceases to be so qualified, or
‘‘(ii) the date on which such tangible property is
no longer held by the qualified opportunity zone business.
‘‘(e) APPLICABLE RULES.—
‘‘(1) 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 (a) is in effect—
‘‘(A) such investment shall be treated as 2 separate
investments, consisting of—
‘‘(i) one investment that only includes amounts
to which the election under subsection (a) applies, and
‘‘(ii) a separate investment consisting of other
amounts, and
‘‘(B) subsections (a), (b), and (c) shall only apply to
the investment described in subparagraph (A)(i).
‘‘(2) RELATED PERSONS.—For purposes of this section, persons are related to each other if such persons are described
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131 STAT. 2188
26 USC prec. 1.
PUBLIC LAW 115–97—DEC. 22, 2017
in section 267(b) or 707(b)(1), determined by substituting ‘20
percent’ for ‘50 percent’ each place it occurs in such sections.
‘‘(3) DECEDENTS.—In the case of a decedent, amounts recognized under this section shall, if not properly includible in
the gross income of the decedent, be includible in gross income
as provided by section 691.
‘‘(4) REGULATIONS.—The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section, including—
‘‘(A) rules for the certification of qualified opportunity
funds for the purposes of this section,
‘‘(B) rules to ensure a qualified opportunity fund has
a reasonable period of time to reinvest the return of capital
from investments in qualified opportunity zone stock and
qualified opportunity zone partnership interests, and to
reinvest proceeds received from the sale or disposition of
qualified opportunity zone property, and
‘‘(C) rules to prevent abuse.
‘‘(f) FAILURE OF QUALIFIED OPPORTUNITY FUND TO MAINTAIN
INVESTMENT STANDARD.—
‘‘(1) IN GENERAL.—If a qualified opportunity fund fails to
meet the 90-percent requirement of subsection (c)(1), 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—
‘‘(A) the excess of—
‘‘(i) the amount equal to 90 percent of its aggregate
assets, over
‘‘(ii) the aggregate amount of qualified opportunity
zone property held by the fund, multiplied by
‘‘(B) the underpayment rate established under section
6621(a)(2) for such month.
‘‘(2) SPECIAL RULE FOR PARTNERSHIPS.—In the case that
the qualified opportunity fund is a partnership, the penalty
imposed by paragraph (1) shall be taken into account proportionately as part of the distributive share of each partner
of the partnership.
‘‘(3) 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 cause.’’.
(b) BASIS ADJUSTMENTS.—Section 1016(a) is amended by
striking ‘‘and’’ at the end of paragraph (36), by striking the period
at the end of paragraph (37) and inserting ‘‘, and’’, and by inserting
after paragraph (37) the following:
‘‘(38) to the extent provided in subsections (b)(2) and (c)
of section 1400Z–2.’’.
(c) CLERICAL AMENDMENT.—The table of subchapters for
chapter 1 is amended by adding at the end the following new
item:
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‘‘SUBCHAPTER Z.
26 USC 1016
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OPPORTUNITY ZONES’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the date of the enactment of this Act.
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131 STAT. 2189
Subtitle D—International Tax Provisions
PART I—OUTBOUND TRANSACTIONS
Subpart A—Establishment of Participation
Exemption System for Taxation of Foreign Income
SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVIDENDS RECEIVED BY DOMESTIC CORPORATIONS FROM
SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATIONS.
(a) IN GENERAL.—Part VIII of subchapter B of chapter 1 is
amended by inserting after section 245 the following new section:
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‘‘SEC. 245A. DEDUCTION FOR FOREIGN SOURCE-PORTION OF DIVIDENDS RECEIVED BY DOMESTIC CORPORATIONS FROM
SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATIONS.
26 USC 245A.
‘‘(a) IN GENERAL.—In the case of any dividend received from
a specified 10-percent owned foreign corporation by a domestic
corporation which is a United States shareholder with respect to
such foreign corporation, there shall be allowed as a deduction
an amount equal to the foreign-source portion of such dividend.
‘‘(b) SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATION.—
For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘specified 10-percent owned
foreign corporation’ means any foreign corporation with respect
to which any domestic corporation is a United States shareholder with respect to such corporation.
‘‘(2) EXCLUSION OF PASSIVE FOREIGN INVESTMENT COMPANIES.—Such term shall not include any corporation which is
a passive foreign investment company (as defined in section
1297) with respect to the shareholder and which is not a
controlled foreign corporation.
‘‘(c) FOREIGN-SOURCE PORTION.—For purposes of this section—
‘‘(1) IN GENERAL.—The foreign-source portion of any dividend from a specified 10-percent owned foreign corporation
is an amount which bears the same ratio to such dividend
as—
‘‘(A) the undistributed foreign earnings of the specified
10-percent owned foreign corporation, bears to
‘‘(B) the total undistributed earnings of such foreign
corporation.
‘‘(2) UNDISTRIBUTED EARNINGS.—The term ‘undistributed
earnings’ means the amount of the earnings and profits of
the specified 10-percent owned foreign corporation (computed
in accordance with sections 964(a) and 986)—
‘‘(A) as of the close of the taxable year of the specified
10-percent owned foreign corporation in which the dividend
is distributed, and
‘‘(B) without diminution by reason of dividends distributed during such taxable year.
‘‘(3) UNDISTRIBUTED FOREIGN EARNINGS.—The term ‘undistributed foreign earnings’ means the portion of the undistributed earnings which is attributable to neither—
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131 STAT. 2190
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(A) income described in subparagraph (A) of section
245(a)(5), nor
‘‘(B) dividends described in subparagraph (B) of such
section (determined without regard to section 245(a)(12)).
‘‘(d) DISALLOWANCE OF FOREIGN TAX CREDIT, ETC.—
‘‘(1) IN GENERAL.—No credit shall be allowed under section
901 for any taxes paid or accrued (or treated as paid or accrued)
with respect to any dividend for which a deduction is allowed
under this section.
‘‘(2) DENIAL OF DEDUCTION.—No deduction shall be allowed
under this chapter for any tax for which credit is not allowable
under section 901 by reason of paragraph (1) (determined by
treating the taxpayer as having elected the benefits of subpart
A of part III of subchapter N).
‘‘(e) SPECIAL RULES FOR HYBRID DIVIDENDS.—
‘‘(1) IN GENERAL.—Subsection (a) shall not apply to any
dividend received by a United States shareholder from a controlled foreign corporation if the dividend is a hybrid dividend.
‘‘(2) 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 shareholder, then, notwithstanding any other provision
of this title—
‘‘(A) the hybrid dividend shall be treated for purposes
of section 951(a)(1)(A) as subpart F income of the receiving
controlled foreign corporation for the taxable year of the
controlled foreign corporation in which the dividend was
received, and
‘‘(B) the United States shareholder shall include in
gross income an amount equal to the shareholder’s pro
rata share (determined in the same manner as under section 951(a)(2)) of the subpart F income described in
subparagraph (A).
‘‘(3) DENIAL OF FOREIGN TAX CREDIT, ETC.—The rules of
subsection (d) shall apply to any hybrid dividend received by,
or any amount included under paragraph (2) in the gross income
of, a United States shareholder.
‘‘(4) HYBRID DIVIDEND.—The term ‘hybrid dividend’ means
an amount received from a controlled foreign corporation—
‘‘(A) for which a deduction would be allowed under
subsection (a) but for this subsection, and
‘‘(B) for which the controlled foreign corporation
received a deduction (or other tax benefit) with respect
to any income, war profits, or excess profits taxes imposed
by any foreign country or possession of the United States.
‘‘(f) SPECIAL RULE FOR PURGING DISTRIBUTIONS OF PASSIVE
FOREIGN INVESTMENT COMPANIES.—Any amount which is treated
as a dividend under section 1291(d)(2)(B) shall not be treated as
a dividend for purposes of this section.
‘‘(g) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to
carry out the provisions of this section, including regulations for
the treatment of United States shareholders owning stock of a
specified 10 percent owned foreign corporation through a partnership.’’.
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131 STAT. 2191
(b) APPLICATION OF HOLDING PERIOD REQUIREMENT.—Subsection (c) of section 246 is amended—
(1) by striking ‘‘or 245’’ in paragraph (1) and inserting
‘‘245, or 245A’’, and
(2) by adding at the end the following new paragraph:
‘‘(5) SPECIAL RULES FOR FOREIGN SOURCE PORTION OF DIVIDENDS RECEIVED FROM SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.—
‘‘(A) 1-YEAR HOLDING PERIOD REQUIREMENT.—For purposes of section 245A—
‘‘(i) paragraph (1)(A) shall be applied—
‘‘(I) by substituting ‘365 days’ for ‘45 days’
each place it appears, and
‘‘(II) by substituting ‘731-day period’ for ‘91day period’, and
‘‘(ii) paragraph (2) shall not apply.
‘‘(B) STATUS MUST BE MAINTAINED DURING HOLDING
PERIOD.—For purposes of applying paragraph (1) with
respect to section 245A, the taxpayer shall be treated as
holding the stock referred to in paragraph (1) for any
period only if—
‘‘(i) the specified 10-percent owned foreign corporation referred to in section 245A(a) is a specified 10percent owned foreign corporation at all times during
such period, and
‘‘(ii) the taxpayer is a United States shareholder
with respect to such specified 10-percent owned foreign
corporation at all times during such period.’’.
(c) APPLICATION OF RULES GENERALLY APPLICABLE TO DEDUCTIONS FOR DIVIDENDS RECEIVED.—
(1) TREATMENT OF DIVIDENDS FROM CERTAIN CORPORATIONS.—Paragraph (1) of section 246(a) is amended by striking
‘‘and 245’’ and inserting ‘‘245, and 245A’’.
(2) COORDINATION WITH SECTION 1059.—Subparagraph (B)
of section 1059(b)(2) is amended by striking ‘‘or 245’’ and
inserting ‘‘245, or 245A’’.
(d) COORDINATION WITH FOREIGN TAX CREDIT LIMITATION.—
Subsection (b) of section 904 is amended by adding at the end
the following new paragraph:
‘‘(5) TREATMENT OF DIVIDENDS FOR WHICH DEDUCTION IS
ALLOWED UNDER SECTION 245A.—For purposes of subsection (a),
in the case of a domestic corporation which is a United States
shareholder with respect to a specified 10-percent owned foreign
corporation, such shareholder’s taxable income from sources
without the United States (and entire taxable income) shall
be determined without regard to—
‘‘(A) the foreign-source portion of any dividend received
from such foreign corporation, and
‘‘(B) any deductions properly allocable or apportioned
to—
‘‘(i) income (other than amounts includible under
section 951(a)(1) or 951A(a)) with respect to stock of
such specified 10-percent owned foreign corporation,
or
‘‘(ii) such stock to the extent income with respect
to such stock is other than amounts includible under
section 951(a)(1) or 951A(a).
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PUBLIC LAW 115–97—DEC. 22, 2017
Any term which is used in section 245A and in this paragraph
shall have the same meaning for purposes of this paragraph
as when used in such section.’’.
(e) CONFORMING AMENDMENTS.—
(1) Subsection (b) of section 951 is amended by striking
‘‘subpart’’ and inserting ‘‘title’’.
(2) Subsection (a) of section 957 is amended by striking
‘‘subpart’’ in the matter preceding paragraph (1) and inserting
‘‘title’’.
(3) The table of sections for part VIII of subchapter B
of chapter 1 is amended by inserting after the item relating
to section 245 the following new item:
26 USC 951.
26 USC 241 prec.
‘‘Sec. 245A. Deduction for foreign source-portion of dividends received by domestic
corporations from certain 10-percent owned foreign corporations.’’.
(f) EFFECTIVE DATE.—The amendments made by this section
shall apply to distributions made after (and, in the case of the
amendments made by subsection (d), deductions with respect to
taxable years ending after) December 31, 2017.
26 USC 245A
note.
SEC. 14102. SPECIAL RULES RELATING TO SALES OR TRANSFERS
INVOLVING SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
26 USC 1248
note.
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26 USC 961 note.
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(a) SALES BY UNITED STATES PERSONS OF STOCK.—
(1) IN GENERAL.—Section 1248 is amended by redesignating
subsection (j) as subsection (k) and by inserting after subsection
(i) the following new subsection:
‘‘(j) 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 1 year or more, 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 245A.’’.
(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to sales or exchanges after December 31,
2017.
(b) BASIS IN SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATION REDUCED BY NONTAXED PORTION OF DIVIDEND FOR PURPOSES
OF DETERMINING LOSS.—
(1) IN GENERAL.—Section 961 is amended by adding at
the end the following new subsection:
‘‘(d) BASIS IN SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATION REDUCED BY NONTAXED PORTION OF DIVIDEND FOR PURPOSES
OF DETERMINING LOSS.—If a domestic corporation received a dividend from a specified 10-percent owned foreign corporation (as
defined in section 245A) in any taxable year, solely for purposes
of determining loss on any disposition of stock of such foreign
corporation in such taxable year or any subsequent taxable year,
the basis of such domestic corporation in such stock shall be reduced
(but not below zero) by the amount of any deduction allowable
to such domestic corporation under section 245A with respect to
such stock except to the extent such basis was reduced under
section 1059 by reason of a dividend for which such a deduction
was allowable.’’.
(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to distributions made after December 31,
2017.
(c) SALE BY A CFC OF A LOWER TIER CFC.—
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2193
(1) IN GENERAL.—Section 964(e) is amended by adding at
the end the following new paragraph:
‘‘(4) COORDINATION WITH DIVIDENDS RECEIVED DEDUCTION.—
‘‘(A) IN GENERAL.—If, for any taxable year of a controlled foreign corporation beginning after December 31,
2017, any amount is treated as a dividend under paragraph
(1) by reason of a sale or exchange by the controlled foreign
corporation of stock in another foreign corporation held
for 1 year or more, then, notwithstanding any other provision of this title—
‘‘(i) the foreign-source portion of such dividend
shall be treated for purposes of section 951(a)(1)(A)
as subpart F income of the selling controlled foreign
corporation for such taxable year,
‘‘(ii) 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 (determined in the same
manner as under section 951(a)(2)) of the amount
treated as subpart F income under clause (i), and
‘‘(iii) the deduction under section 245A(a) shall
be allowable to the United States shareholder with
respect to the subpart F income included in gross
income under clause (ii) in the same manner as if
such subpart F income were a dividend received by
the shareholder from the selling controlled foreign corporation.
‘‘(B) APPLICATION OF BASIS OR SIMILAR ADJUSTMENT.—
For purposes of this title, 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 31, 2017,
rules similar to the rules of section 961(d) shall apply.
‘‘(C) FOREIGN-SOURCE PORTION.—For purposes of this
paragraph, the foreign-source portion of any amount
treated as a dividend under paragraph (1) shall be determined in the same manner as under section 245A(c).’’.
(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to sales or exchanges after December 31,
2017.
(d) TREATMENT OF FOREIGN BRANCH LOSSES TRANSFERRED TO
SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATIONS.—
(1) IN GENERAL.—Part II of subchapter B of chapter 1
is amended by adding at the end the following new section:
26 USC 964.
‘‘SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANSFERRED TO
SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATIONS.
26 USC 91.
26 USC 964 note.
‘‘(a) IN GENERAL.—If a domestic corporation transfers substantially all of the assets of a foreign branch (within the meaning
of section 367(a)(3)(C), as in effect before the date of the enactment
of the Tax Cuts and Jobs Act) to a specified 10-percent owned
foreign corporation (as defined in section 245A) with respect to
which it is a United States shareholder after such transfer, such
domestic corporation shall include in gross income for the taxable
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26 USC 71 prec.
PUBLIC LAW 115–97—DEC. 22, 2017
year which includes such transfer an amount equal to the transferred loss amount with respect to such transfer.
‘‘(b) TRANSFERRED LOSS AMOUNT.—For purposes of this section,
the term ‘transferred loss amount’ means, with respect to any
transfer of substantially all of the assets of a foreign branch, the
excess (if any) of—
‘‘(1) the sum of losses—
‘‘(A) which were incurred by the foreign branch after
December 31, 2017, and before the transfer, and
‘‘(B) with respect to which a deduction was allowed
to the taxpayer, over
‘‘(2) the sum of—
‘‘(A) 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 transfer,
and
‘‘(B) any amount which is recognized under section
904(f)(3) on account of the transfer.
‘‘(c) REDUCTION FOR RECOGNIZED GAINS.—The transferred loss
amount shall be reduced (but not below zero) by the amount of
gain recognized by the taxpayer on account of the transfer (other
than amounts taken into account under subsection (b)(2)(B)).
‘‘(d) SOURCE OF INCOME.—Amounts included in gross income
under this section shall be treated as derived from sources within
the United States.
‘‘(e) BASIS ADJUSTMENTS.—Consistent with such regulations or
other guidance as the Secretary shall prescribe, proper adjustments
shall be made in the adjusted basis of the taxpayer’s stock in
the specified 10-percent owned foreign corporation to which the
transfer is made, and in the transferee’s adjusted basis in the
property transferred, to reflect amounts included in gross income
under this section.’’.
(2) CLERICAL AMENDMENT.—The table of sections for part
II of subchapter B of chapter 1 is amended by adding at
the end the following new item:
‘‘Sec. 91. Certain foreign branch losses transferred to specified 10-percent owned
foreign corporations.’’.
26 USC 91 note.
26 USC 91 note.
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26 USC 367.
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(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to transfers after December 31, 2017.
(4) TRANSITION RULE.—The amount of gain taken into
account under section 91(c) of the Internal Revenue Code of
1986, as added by this subsection, shall be reduced by the
amount of gain which would be recognized under section
367(a)(3)(C) (determined without regard to the amendments
made by subsection (e)) with respect to losses incurred before
January 1, 2018.
(e) REPEAL OF ACTIVE TRADE OR BUSINESS EXCEPTION UNDER
SECTION 367.—
(1) IN GENERAL.—Section 367(a) is amended by striking
paragraph (3) and redesignating paragraphs (4), (5), and (6)
as paragraphs (3), (4), and (5), respectively.
(2) CONFORMING AMENDMENTS.—Section 367(a)(4), as
redesignated by paragraph (1), is amended—
(A) by striking ‘‘Paragraphs (2) and (3)’’ and inserting
‘‘Paragraph (2)’’, and
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131 STAT. 2195
(B) by striking ‘‘PARAGRAPHS (2) AND (3)’’ in the heading
and inserting ‘‘PARAGRAPH (2)’’.
(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to transfers after December 31, 2017.
26 USC 367 note.
SEC. 14103. TREATMENT OF DEFERRED FOREIGN INCOME UPON
TRANSITION TO PARTICIPATION EXEMPTION SYSTEM OF
TAXATION.
(a) IN GENERAL.—Section 965 is amended to read as follows:
26 USC 965.
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‘‘SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON
TRANSITION TO PARTICIPATION EXEMPTION SYSTEM OF
TAXATION.
‘‘(a) TREATMENT OF DEFERRED FOREIGN INCOME AS SUBPART
F INCOME.—In the case of the last taxable year of a deferred
foreign income corporation which begins before January 1, 2018,
the subpart F income of such foreign corporation (as otherwise
determined for such taxable year under section 952) shall be
increased by the greater of—
‘‘(1) the accumulated post-1986 deferred foreign income
of such corporation determined as of November 2, 2017, or
‘‘(2) the accumulated post-1986 deferred foreign income
of such corporation determined as of December 31, 2017.
‘‘(b) REDUCTION IN AMOUNTS INCLUDED IN GROSS INCOME OF
UNITED STATES SHAREHOLDERS OF SPECIFIED FOREIGN CORPORATIONS WITH DEFICITS IN EARNINGS AND PROFITS.—
‘‘(1) 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
corporation, the amount which would (but for this subsection)
be taken into account under section 951(a)(1) by reason of
subsection (a) 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 (2) to such deferred foreign income
corporation.
‘‘(2) ALLOCATION OF AGGREGATE FOREIGN E&P DEFICIT.—
The aggregate foreign E&P deficit of any United States shareholder shall be allocated among the deferred foreign income
corporations of such United States shareholder in an amount
which bears the same proportion to such aggregate as—
‘‘(A) such United States shareholder’s pro rata share
of the accumulated post-1986 deferred foreign income of
each such deferred foreign income corporation, bears to
‘‘(B) the aggregate of such United States shareholder’s
pro rata share of the accumulated post-1986 deferred foreign income of all deferred foreign income corporations
of such United States shareholder.
‘‘(3) DEFINITIONS RELATED TO E&P DEFICITS.—For purposes
of this subsection—
‘‘(A) AGGREGATE FOREIGN E&P DEFICIT.—
‘‘(i) IN GENERAL.—The term ‘aggregate foreign E&P
deficit’ means, with respect to any United States shareholder, the lesser of—
‘‘(I) the aggregate of such shareholder’s pro
rata shares of the specified E&P deficits of the
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131 STAT. 2196
PUBLIC LAW 115–97—DEC. 22, 2017
E&P deficit foreign corporations of such shareholder, or
‘‘(II) the amount determined under paragraph
(2)(B).
‘‘(ii) ALLOCATION OF DEFICIT.—If the amount
described in clause (i)(II) is less than the amount
described in clause (i)(I), then the shareholder shall
designate, in such form and manner as the Secretary
determines—
‘‘(I) 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 taxpayer,
and
‘‘(II) in the case of an E&P deficit corporation
which has a qualified deficit (as defined in section
952), the portion (if any) of the deficit taken into
account under subclause (I) which is attributable
to a qualified deficit, including the qualified activities to which such portion is attributable.
‘‘(B) E&P DEFICIT FOREIGN CORPORATION.—The term
‘E&P deficit foreign corporation’ means, with respect to
any taxpayer, any specified foreign corporation with respect
to which such taxpayer is a United States shareholder,
if, as of November 2, 2017—
‘‘(i) such specified foreign corporation has a deficit
in post-1986 earnings and profits,
‘‘(ii) such corporation was a specified foreign corporation, and
‘‘(iii) such taxpayer was a United States shareholder of such corporation.
‘‘(C) SPECIFIED E&P DEFICIT.—The term ‘specified E&P
deficit’ means, with respect to any E&P deficit foreign
corporation, the amount of the deficit referred to in
subparagraph (B).
‘‘(4) TREATMENT OF EARNINGS AND PROFITS IN FUTURE
YEARS.—
‘‘(A) REDUCED EARNINGS AND PROFITS TREATED AS PREVIOUSLY TAXED INCOME WHEN DISTRIBUTED.—For purposes
of applying section 959 in any taxable year beginning with
the taxable year described in subsection (a), with respect
to any United States shareholder of a deferred foreign
income corporation, an amount equal to such shareholder’s
reduction under paragraph (1) 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 951(a).
‘‘(B) E&P DEFICITS.—For purposes of this title, with
respect to any taxable year beginning with the taxable
year described in subsection (a), a United States shareholder’s pro rata share of the earnings and profits of any
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 (1), and, for purposes of section 952, such
increase shall be attributable to the same activity to which
the deficit so taken into account was attributable.
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131 STAT. 2197
‘‘(5) NETTING AMONG UNITED STATES SHAREHOLDERS IN
SAME AFFILIATED GROUP.—
‘‘(A) IN GENERAL.—In the case of any affiliated group
which includes at least one E&P net surplus shareholder
and one E&P net deficit shareholder, the amount which
would (but for this paragraph) be taken into account under
section 951(a)(1) by reason of subsection (a) by each such
E&P net surplus shareholder shall be reduced (but not
below zero) by such shareholder’s applicable share of the
affiliated group’s aggregate unused E&P deficit.
‘‘(B) E&P NET SURPLUS SHAREHOLDER.—For purposes
of this paragraph, the term ‘E&P net surplus shareholder’
means any United States shareholder which would (determined without regard to this paragraph) take into account
an amount greater than zero under section 951(a)(1) by
reason of subsection (a).
‘‘(C) E&P NET DEFICIT SHAREHOLDER.—For purposes
of this paragraph, the term ‘E&P net deficit shareholder’
means any United States shareholder if—
‘‘(i) the aggregate foreign E&P deficit with respect
to such shareholder (as defined in paragraph (3)(A)
without regard to clause (i)(II) thereof), exceeds
‘‘(ii) the amount which would (but for this subsection) be taken into account by such shareholder
under section 951(a)(1) by reason of subsection (a).
‘‘(D) AGGREGATE UNUSED E&P DEFICIT.—For purposes
of this paragraph—
‘‘(i) IN GENERAL.—The term ‘aggregate unused
E&P deficit’ means, with respect to any affiliated
group, the lesser of—
‘‘(I) the sum of the excesses described in
subparagraph (C), determined with respect to each
E&P net deficit shareholder in such group, or
‘‘(II) the amount determined under subparagraph (E)(ii).
‘‘(ii) REDUCTION WITH RESPECT TO E&P NET DEFICIT
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SHAREHOLDERS WHICH ARE NOT WHOLLY OWNED BY THE
AFFILIATED GROUP.—If the group ownership percentage
of any E&P net deficit shareholder is less than 100
percent, the amount of the excess described in subparagraph (C) which is taken into account under clause
(i)(I) with respect to such E&P net deficit shareholder
shall be such group ownership percentage of such
amount.
‘‘(E) APPLICABLE SHARE.—For purposes of this paragraph, the term ‘applicable share’ means, with respect to
any E&P net surplus shareholder in any affiliated group,
the amount which bears the same proportion to such
group’s aggregate unused E&P deficit as—
‘‘(i) the product of—
‘‘(I) such shareholder’s group ownership
percentage, multiplied by
‘‘(II) the amount which would (but for this
paragraph) be taken into account under section
951(a)(1) by reason of subsection (a) by such shareholder, bears to
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131 STAT. 2198
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(ii) the aggregate amount determined under
clause (i) with respect to all E&P net surplus shareholders in such group.
‘‘(F) GROUP OWNERSHIP PERCENTAGE.—For purposes of
this paragraph, the term ‘group ownership percentage’
means, with respect to any United States shareholder in
any affiliated group, the percentage of the value of the
stock of such United States shareholder which is held
by other includible corporations in such affiliated group.
Notwithstanding the preceding sentence, the group ownership percentage of the common parent of the affiliated
group is 100 percent. Any term used in this subparagraph
which is also used in section 1504 shall have the same
meaning as when used in such section.
‘‘(c) APPLICATION OF PARTICIPATION EXEMPTION TO INCLUDED
INCOME.—
‘‘(1) IN GENERAL.—In the case of a United States shareholder of a deferred foreign income corporation, 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 951(a)(1) by reason of this section
an amount equal to the sum of—
‘‘(A) the United States shareholder’s 8 percent rate
equivalent percentage of the excess (if any) of—
‘‘(i) the amount so included as gross income, over
‘‘(ii) the amount of such United States shareholder’s aggregate foreign cash position, plus
‘‘(B) the United States shareholder’s 15.5 percent rate
equivalent percentage of so much of the amount described
in subparagraph (A)(ii) as does not exceed the amount
described in subparagraph (A)(i).
‘‘(2) 8 AND 15.5 PERCENT RATE EQUIVALENT PERCENTAGES.—
For purposes of this subsection—
‘‘(A) 8 PERCENT RATE EQUIVALENT PERCENTAGE.—The
term ‘8 percent rate equivalent percentage’ means, with
respect to any United States shareholder for any taxable
year, the percentage which would result in the amount
to which such percentage applies being subject to a 8
percent rate of tax determined by only taking into account
a deduction equal to such percentage of such amount and
the highest rate of tax specified in section 11 for such
taxable year. In the case of any taxable year of a United
States shareholder to which section 15 applies, the highest
rate of tax under section 11 before the effective date of
the change in rates and the highest rate of tax under
section 11 after the effective date of such change shall
each be taken into account under the preceding sentence
in the same proportions as the portion of such taxable
year which is before and after such effective date, respectively.
‘‘(B) 15.5 PERCENT RATE EQUIVALENT PERCENTAGE.—
The term ‘15.5 percent rate equivalent percentage’ means,
with respect to any United States shareholder for any
taxable year, the percentage determined under subparagraph (A) applied by substituting ‘15.5 percent rate of
tax’ for ‘8 percent rate of tax’.
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2199
‘‘(3) AGGREGATE FOREIGN CASH POSITION.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—The term ‘aggregate foreign cash
position’ means, with respect to any United States shareholder, the greater of—
‘‘(i) 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 1, 2018, or
‘‘(ii) one half of the sum of—
‘‘(I) the aggregate described in clause (i) determined as of the close of the last taxable year
of each such specified foreign corporation which
ends before November 2, 2017, plus
‘‘(II) the aggregate described in clause (i) determined as of the close of the taxable year of each
such specified foreign corporation which precedes
the taxable year referred to in subclause (I).
‘‘(B) CASH POSITION.—For purposes of this paragraph,
the cash position of any specified foreign corporation is
the sum of—
‘‘(i) cash held by such foreign corporation,
‘‘(ii) the net accounts receivable of such foreign
corporation, plus
‘‘(iii) the fair market value of the following assets
held by such corporation:
‘‘(I) Personal property which is of a type that
is actively traded and for which there is an established financial market.
‘‘(II) Commercial paper, certificates of deposit,
the securities of the Federal government and of
any State or foreign government.
‘‘(III) Any foreign currency.
‘‘(IV) Any obligation with a term of less than
one year.
‘‘(V) Any asset which the Secretary identifies
as being economically equivalent to any asset
described in this subparagraph.
‘‘(C) NET ACCOUNTS RECEIVABLE.—For purposes of this
paragraph, the term ‘net accounts receivable’ means, with
respect to any specified foreign corporation, the excess (if
any) of—
‘‘(i) such corporation’s accounts receivable, over
‘‘(ii) such corporation’s accounts payable (determined consistent with the rules of section 461).
‘‘(D) PREVENTION OF DOUBLE COUNTING.—Cash positions of a specified foreign corporation described in clause
(ii), (iii)(I), or (iii)(IV) of subparagraph (B) shall not be
taken into account by a United States shareholder under
subparagraph (A) 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 corporation.
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‘‘(E) CASH POSITIONS OF CERTAIN NON-CORPORATE ENTITIES TAKEN INTO ACCOUNT.—An entity (other than a corporation) shall be treated as a specified foreign corporation
of a United States shareholder for purposes of determining
such United States shareholder’s aggregate foreign cash
position if any interest in such entity is held by a specified
foreign corporation of such United States shareholder
(determined after application of this subparagraph) and
such entity would be a specified foreign corporation of
such United States shareholder if such entity were a foreign
corporation.
‘‘(F) 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 subsection, such transaction shall be disregarded for
purposes of this subsection.
‘‘(d) DEFERRED FOREIGN INCOME CORPORATION; ACCUMULATED
POST-1986 DEFERRED FOREIGN INCOME.—For purposes of this section—
‘‘(1) DEFERRED FOREIGN INCOME CORPORATION.—The term
‘deferred foreign income corporation’ means, with respect to
any United States shareholder, any specified foreign corporation
of such United States shareholder which has accumulated post1986 deferred foreign income (as of the date referred to in
paragraph (1) or (2) of subsection (a)) greater than zero.
‘‘(2) ACCUMULATED POST-1986 DEFERRED FOREIGN INCOME.—
The term ‘accumulated post-1986 deferred foreign income’
means the post-1986 earnings and profits except to the extent
such earnings—
‘‘(A) 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 chapter, or
‘‘(B) in the case of a controlled foreign corporation,
if distributed, would be excluded from the gross income
of a United States shareholder under section 959.
To the extent provided in regulations or other guidance prescribed by the Secretary, in the case of any controlled foreign
corporation which has shareholders which are not United States
shareholders, accumulated post-1986 deferred foreign income
shall be appropriately reduced by amounts which would be
described in subparagraph (B) if such shareholders were United
States shareholders.
‘‘(3) POST-1986 EARNINGS AND PROFITS.—The term ‘post-1986
earnings and profits’ means the earnings and profits of the
foreign corporation (computed in accordance with sections
964(a) and 986, and by only taking into account periods when
the foreign corporation was a specified foreign corporation)
accumulated in taxable years beginning after December 31,
1986, and determined—
‘‘(A) as of the date referred to in paragraph (1) or
(2) of subsection (a), whichever is applicable with respect
to such foreign corporation, and
‘‘(B) without diminution by reason of dividends distributed during the taxable year described in subsection (a)
other than dividends distributed to another specified foreign corporation.
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131 STAT. 2201
‘‘(e) SPECIFIED FOREIGN CORPORATION.—
‘‘(1) IN GENERAL.—For purposes of this section, the term
‘specified foreign corporation’ means—
‘‘(A) any controlled foreign corporation, and
‘‘(B) any foreign corporation with respect to which one
or more domestic corporations is a United States shareholder.
‘‘(2) APPLICATION TO CERTAIN FOREIGN CORPORATIONS.—For
purposes of sections 951 and 961, a foreign corporation
described in paragraph (1)(B) shall be treated as a controlled
foreign corporation solely for purposes of taking into account
the subpart F income of such corporation under subsection
(a) (and for purposes of applying subsection (f)).
‘‘(3) EXCLUSION OF PASSIVE FOREIGN INVESTMENT COMPANIES.—Such term shall not include any corporation which is
a passive foreign investment company (as defined in section
1297) with respect to the shareholder and which is not a
controlled foreign corporation.
‘‘(f) DETERMINATIONS OF PRO RATA SHARE.—
‘‘(1) IN GENERAL.—For purposes of this section, 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
951(a)(2) by treating such amount in the same manner as
subpart F income (and by treating such specified foreign corporation as a controlled foreign corporation).
‘‘(2) SPECIAL RULES.—The portion which is included in the
income of a United States shareholder under section 951(a)(1)
by reason of subsection (a) which is equal to the deduction
allowed under subsection (c) by reason of such inclusion—
‘‘(A) shall be treated as income exempt from tax for
purposes of sections 705(a)(1)(B) and 1367(a)(1)(A), and
‘‘(B) shall not be treated as income exempt from tax
for purposes of determining whether an adjustment shall
be made to an accumulated adjustment account under section 1368(e)(1)(A).
‘‘(g) DISALLOWANCE OF FOREIGN TAX CREDIT, ETC.—
‘‘(1) IN GENERAL.—No credit shall be allowed under section
901 for the applicable percentage of any taxes paid or accrued
(or treated as paid or accrued) with respect to any amount
for which a deduction is allowed under this section.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes of this subsection, the term ‘applicable percentage’ means the amount
(expressed as a percentage) equal to the sum of—
‘‘(A) 0.771 multiplied by the ratio of—
‘‘(i) the excess to which subsection (c)(1)(A) applies,
divided by
‘‘(ii) the sum of such excess plus the amount to
which subsection (c)(1)(B) applies, plus
‘‘(B) 0.557 multiplied by the ratio of—
‘‘(i) the amount to which subsection (c)(1)(B)
applies, divided by
‘‘(ii) the sum described in subparagraph (A)(ii).
‘‘(3) DENIAL OF DEDUCTION.—No deduction shall be allowed
under this chapter for any tax for which credit is not allowable
under section 901 by reason of paragraph (1) (determined by
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treating the taxpayer as having elected the benefits of subpart
A of part III of subchapter N).
‘‘(4) COORDINATION WITH SECTION 78.—With respect to the
taxes treated as paid or accrued by a domestic corporation
with respect to amounts which are includible in gross income
of such domestic corporation by reason of this section, section
78 shall apply only to so much of such taxes as bears the
same proportion to the amount of such taxes as—
‘‘(A) the excess of—
‘‘(i) the amounts which are includible in gross
income of such domestic corporation by reason of this
section, over
‘‘(ii) the deduction allowable under subsection (c)
with respect to such amounts, bears to
‘‘(B) such amounts.
‘‘(h) ELECTION TO PAY LIABILITY IN INSTALLMENTS.—
‘‘(1) IN GENERAL.—In the case of a United States shareholder of a deferred foreign income corporation, such United
States shareholder may elect to pay the net tax liability under
this section in 8 installments of the following amounts:
‘‘(A) 8 percent of the net tax liability in the case of
each of the first 5 of such installments,
‘‘(B) 15 percent of the net tax liability in the case
of the 6th such installment,
‘‘(C) 20 percent of the net tax liability in the case
of the 7th such installment, and
‘‘(D) 25 percent of the net tax liability in the case
of the 8th such installment.
‘‘(2) DATE FOR PAYMENT OF INSTALLMENTS.—If an election
is made under paragraph (1), the first installment shall be
paid on the due date (determined without regard to any extension of time for filing the return) for the return of tax for
the taxable year described in subsection (a) and each succeeding
installment shall be paid on the due date (as so determined)
for the return of tax for the taxable year following the taxable
year with respect to which the preceding installment was made.
‘‘(3) ACCELERATION OF PAYMENT.—If there is an addition
to tax for failure to timely pay any installment required under
this subsection, a liquidation or sale of substantially all the
assets of the taxpayer (including in a title 11 or similar case),
a cessation of business by the taxpayer, or any similar circumstance, then the unpaid portion of all remaining installments shall be due on the date of such event (or in the case
of a title 11 or similar case, the day before the petition is
filed). 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 taxpayer.
‘‘(4) PRORATION OF DEFICIENCY TO INSTALLMENTS.—If an
election is made under paragraph (1) to pay the net tax liability
under this section in installments and a deficiency has been
assessed with respect to such net tax liability, the deficiency
shall be prorated to the installments payable under paragraph
(1). The part of the deficiency so prorated to any installment
the date for payment of which has not arrived shall be collected
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131 STAT. 2203
at the same time as, and as a part of, such installment. 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 Secretary. This subsection shall not apply
if the deficiency is due to negligence, to intentional disregard
of rules and regulations, or to fraud with intent to evade
tax.
‘‘(5) ELECTION.—Any election under paragraph (1) shall
be made not later than the due date for the return of tax
for the taxable year described in subsection (a) and shall be
made in such manner as the Secretary shall provide.
‘‘(6) NET TAX LIABILITY UNDER THIS SECTION.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—The net tax liability under this section with respect to any United States shareholder is the
excess (if any) of—
‘‘(i) 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
951(a)(1) by reason of this section, over
‘‘(ii) such taxpayer’s net income tax for such taxable year determined—
‘‘(I) without regard to this section, and
‘‘(II) without regard to any income or deduction
properly attributable to a dividend received by
such United States shareholder from any deferred
foreign income corporation.
‘‘(B) NET INCOME TAX.—The term ‘net income tax’
means the regular tax liability reduced by the credits
allowed under subparts A, B, and D of part IV of subchapter
A.
‘‘(i) SPECIAL RULES FOR S CORPORATION SHAREHOLDERS.—
‘‘(1) IN GENERAL.—In the case of any S corporation which
is a United States shareholder of a deferred foreign income
corporation, 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 liability. 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 event.
‘‘(2) TRIGGERING EVENT.—
‘‘(A) IN GENERAL.—In the case of any shareholder’s
net tax liability under this section with respect to any
S corporation, the triggering event with respect to such
liability is whichever of the following occurs first:
‘‘(i) Such corporation ceases to be an S corporation
(determined as of the first day of the first taxable
year that such corporation is not an S corporation).
‘‘(ii) A liquidation or sale of substantially all the
assets of such S corporation (including in a title 11
or similar case), a cessation of business by such S
corporation, such S corporation ceases to exist, or any
similar circumstance.
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PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(iii) A transfer of any share of stock in such
S corporation by the taxpayer (including by reason
of death, or otherwise).
‘‘(B) PARTIAL TRANSFERS OF STOCK.—In the case of
a transfer of less than all of the taxpayer’s shares of stock
in the S corporation, 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 stock.
‘‘(C) TRANSFER OF LIABILITY.—A transfer described in
clause (iii) of subparagraph (A) 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 taxpayer.
‘‘(3) 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 (h)(6) if the only subpart F income taken
into account by such shareholder by reason of this section
were allocations from such S corporation.
‘‘(4) ELECTION TO PAY DEFERRED LIABILITY IN INSTALLMENTS.—In the case of a taxpayer which elects to defer payment
under paragraph (1)—
‘‘(A) subsection (h) shall be applied separately with
respect to the liability to which such election applies,
‘‘(B) an election under subsection (h) 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 occurs,
‘‘(C) the first installment under subsection (h) with
respect to such liability shall be paid not later than such
due date (but determined without regard to any extension
of time for filing the return), and
‘‘(D) if the triggering event with respect to any net
tax liability is described in paragraph (2)(A)(ii), an election
under subsection (h) with respect to such liability may
be made only with the consent of the Secretary.
‘‘(5) JOINT AND SEVERAL LIABILITY OF S CORPORATION.—
If any shareholder of an S corporation elects to defer payment
under paragraph (1), such S corporation shall be jointly and
severally liable for such payment and any penalty, addition
to tax, or additional amount attributable thereto.
‘‘(6) 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
liability.
‘‘(7) ANNUAL REPORTING OF NET TAX LIABILITY.—
‘‘(A) IN GENERAL.—Any shareholder of an S corporation
which makes an election under paragraph (1) 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 returns.
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131 STAT. 2205
‘‘(B) DEFERRED NET TAX LIABILITY.—For purposes of
this paragraph, the term ‘deferred net tax liability’ means,
with respect to any taxable year, the amount of net tax
liability payment of which has been deferred under paragraph (1) and which has not been assessed on a return
of tax for any prior taxable year.
‘‘(C) FAILURE TO REPORT.—In the case of any failure
to report any amount required to be reported under
subparagraph (A) with respect to any taxable year before
the due date for the return of tax for such taxable year,
there shall be assessed on such return as an addition
to tax 5 percent of such amount.
‘‘(8) ELECTION.—Any election under paragraph (1)—
‘‘(A) 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 (a) is taken into account,
and
‘‘(B) shall be made in such manner as the Secretary
shall provide.
‘‘(j) 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 6037(a) 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 (c). Any copy provided to a shareholder under section 6037(b)
shall include a statement of such shareholder’s pro rata share
of such amounts.
‘‘(k) EXTENSION OF LIMITATION ON ASSESSMENT.—Notwithstanding section 6501, the limitation on the time period for the
assessment of the net tax liability under this section (as defined
in subsection (h)(6)) shall not expire before the date that is 6
years after the return for the taxable year described in such subsection was filed.
‘‘(l) RECAPTURE FOR EXPATRIATED ENTITIES.—
‘‘(1) IN GENERAL.—If a deduction is allowed under subsection (c) to a United States shareholder and such shareholder
first becomes an expatriated entity at any time during the
10-year period beginning on the date of the enactment of the
Tax Cuts and Jobs Act (with respect to a surrogate foreign
corporation which first becomes a surrogate foreign corporation
during such period), then—
‘‘(A) 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 35 percent
of the amount of the deduction allowed under subsection
(c), and
‘‘(B) no credits shall be allowed against the increase
in tax under subparagraph (A).
‘‘(2) EXPATRIATED ENTITY.—For purposes of this subsection,
the term ‘expatriated entity’ has the same meaning given such
term under section 7874(a)(2), 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 7874(b).
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131 STAT. 2206
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(3) SURROGATE FOREIGN CORPORATION.—For purposes of
this subsection, the term ‘surrogate foreign corporation’ has
the meaning given such term in section 7874(a)(2)(B).
‘‘(m) SPECIAL RULES FOR UNITED STATES SHAREHOLDERS WHICH
ARE REAL ESTATE INVESTMENT TRUSTS.—
‘‘(1) IN GENERAL.—If a real estate investment trust is a
United States shareholder in 1 or more deferred foreign income
corporations—
‘‘(A) any amount required to be taken into account
under section 951(a)(1) 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 (2)
and (3) of section 856(c) to any taxable year for which
such amount is taken into account under section 951(a)(1),
and
‘‘(B) if the real estate investment trust elects the
application of this subparagraph, notwithstanding subsection (a), any amount required to be taken into account
under section 951(a)(1) by reason of this section shall,
in lieu of the taxable year in which it would otherwise
be included in gross income (for purposes of the computation of real estate investment trust taxable income under
section 857(b)), be included in gross income as follows:
‘‘(i) 8 percent of such amount in the case of each
of the taxable years in the 5-taxable year period beginning with the taxable year in which such amount would
otherwise be included.
‘‘(ii) 15 percent of such amount in the case of
the 1st taxable year following such period.
‘‘(iii) 20 percent of such amount in the case of
the 2nd taxable year following such period.
‘‘(iv) 25 percent of such amount in the case of
the 3rd taxable year following such period.
‘‘(2) RULES FOR TRUSTS ELECTING DEFERRED INCLUSION.—
‘‘(A) ELECTION.—Any election under paragraph (1)(B)
shall be made not later than the due date for the first
taxable year in the 5-taxable year period described in clause
(i) of paragraph (1)(B) and shall be made in such manner
as the Secretary shall provide.
‘‘(B) SPECIAL RULES.—If an election under paragraph
(1)(B) is in effect with respect to any real estate investment
trust, the following rules shall apply:
‘‘(i) APPLICATION OF PARTICIPATION EXEMPTION.—
For purposes of subsection (c)(1)—
‘‘(I) the aggregate amount to which subparagraph (A) or (B) of subsection (c)(1) applies shall
be determined without regard to the election,
‘‘(II) each such aggregate amount shall be allocated to each taxable year described in paragraph
(1)(B) in the same proportion as the amount
included in the gross income of such United States
shareholder under section 951(a)(1) by reason of
this section is allocated to each such taxable year.
‘‘(III) NO INSTALLMENT PAYMENTS.—The real
estate investment trust may not make an election
under subsection (g) for any taxable year described
in paragraph (1)(B).
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131 STAT. 2207
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‘‘(ii) ACCELERATION OF INCLUSION.—If there is a
liquidation or sale of substantially all the assets of
the real estate investment trust (including in a title
11 or similar case), a cessation of business by such
trust, or any similar circumstance, then any amount
not yet included in gross income under paragraph
(1)(B) 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 (or in the case of
a title 11 or similar case, the day before the petition
is filed).
‘‘(n) ELECTION NOT TO APPLY NET OPERATING LOSS DEDUCTION.—
‘‘(1) 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
(a), then the amount described in paragraph (2) shall not be
taken into account—
‘‘(A) in determining the amount of the net operating
loss deduction under section 172 of such shareholder for
such taxable year, or
‘‘(B) 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 172.
‘‘(2) AMOUNT DESCRIBED.—The amount described in this
paragraph is the sum of—
‘‘(A) the amount required to be taken into account
under section 951(a)(1) by reason of this section (determined after the application of subsection (c)), plus
‘‘(B) 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 year, the taxes deemed to be paid by
such corporation under subsections (a) and (b) of section
960 for such taxable year with respect to the amount
described in subparagraph (A) which are treated as a dividends under section 78.
‘‘(3) ELECTION.—Any election under this subsection shall
be made not later than the due date (including extensions)
for filing the return of tax for the taxable year and shall
be made in such manner as the Secretary shall prescribe.
‘‘(o) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to
carry out the provisions of this section, including—
‘‘(1) regulations or other guidance to provide appropriate
basis adjustments, and
‘‘(2) regulations or other guidance to prevent the avoidance
of the purposes of this section, including through a reduction
in earnings and profits, through changes in entity classification
or accounting methods, or otherwise.’’.
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26 USC 951 prec.
PUBLIC LAW 115–97—DEC. 22, 2017
(b) CLERICAL AMENDMENT.—The table of sections for subpart
F of part III of subchapter N of chapter 1 is amended by striking
the item relating to section 965 and inserting the following:
‘‘Sec. 965. Treatment of deferred foreign income upon transition to participation exemption system of taxation.’’.
Subpart B—Rules Related to Passive and Mobile
Income
CHAPTER 1—TAXATION OF FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL INTANGIBLE LOW-TAXED
INCOME
SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTANGIBLE LOWTAXED INCOME BY UNITED STATES SHAREHOLDERS.
(a) IN GENERAL.—Subpart F of part III of subchapter N of
chapter 1 is amended by inserting after section 951 the following
new section:
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26 USC 951A.
‘‘SEC. 951A. GLOBAL INTANGIBLE LOW-TAXED INCOME INCLUDED IN
GROSS INCOME OF UNITED STATES SHAREHOLDERS.
‘‘(a) 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 year.
‘‘(b) GLOBAL INTANGIBLE LOW-TAXED INCOME.—For purposes
of this section—
‘‘(1) IN GENERAL.—The term ‘global intangible low-taxed
income’ means, with respect to any United States shareholder
for any taxable year of such United States shareholder, the
excess (if any) of—
‘‘(A) such shareholder’s net CFC tested income for such
taxable year, over
‘‘(B) such shareholder’s net deemed tangible income
return for such taxable year.
‘‘(2) NET DEEMED TANGIBLE INCOME RETURN.—The term
‘net deemed tangible income return’ means, with respect to
any United States shareholder for any taxable year, the excess
of—
‘‘(A) 10 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 (determined for each taxable year of each
such controlled foreign corporation which ends in or with
such taxable year of such United States shareholder), over
‘‘(B) the amount of interest expense taken into account
under subsection (c)(2)(A)(ii) in determining the shareholder’s net CFC tested income for the taxable year to
the extent the interest income attributable to such expense
is not taken into account in determining such shareholder’s
net CFC tested income.
‘‘(c) NET CFC TESTED INCOME.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘net CFC tested income’ means,
with respect to any United States shareholder for any taxable
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131 STAT. 2209
year of such United States shareholder, the excess (if any)
of—
‘‘(A) 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 (determined for each taxable year of such controlled foreign corporation which ends in or with such
taxable year of such United States shareholder), over
‘‘(B) 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 (determined for each taxable year of such controlled foreign corporation which ends in or with such
taxable year of such United States shareholder).
‘‘(2) TESTED INCOME; TESTED LOSS.—For purposes of this
section—
‘‘(A) TESTED INCOME.—The term ‘tested income’ means,
with respect to any controlled foreign corporation for any
taxable year of such controlled foreign corporation, the
excess (if any) of—
‘‘(i) the gross income of such corporation determined without regard to—
‘‘(I) any item of income described in section
952(b),
‘‘(II) any gross income taken into account in
determining the subpart F income of such corporation,
‘‘(III) any gross income excluded from the foreign base company income (as defined in section
954) and the insurance income (as defined in section 953) of such corporation by reason of section
954(b)(4),
‘‘(IV) any dividend received from a related person (as defined in section 954(d)(3)), and
‘‘(V) any foreign oil and gas extraction income
(as defined in section 907(c)(1)) of such corporation,
over
‘‘(ii) the deductions (including taxes) properly allocable to such gross income under rules similar to the
rules of section 954(b)(5) (or to which such deductions
would be allocable if there were such gross income).
‘‘(B) TESTED LOSS.—
‘‘(i) IN GENERAL.—The term ‘tested loss’ means,
with respect to any controlled foreign corporation for
any taxable year of such controlled foreign corporation,
the excess (if any) of the amount described in subparagraph (A)(ii) over the amount described in subparagraph (A)(i).
‘‘(ii) COORDINATION WITH SUBPART F TO DENY
DOUBLE BENEFIT OF LOSSES.—Section 952(c)(1)(A) shall
be applied by increasing the earnings and profits of
the controlled foreign corporation by the tested loss
of such corporation.
‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.—For purposes
of this section—
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131 STAT. 2210
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(1) IN GENERAL.—The term ‘qualified business asset investment’ means, with respect to any controlled foreign corporation
for any taxable year, the average of such corporation’s aggregate
adjusted bases as of the close of each quarter of such taxable
year in specified tangible property—
‘‘(A) used in a trade or business of the corporation,
and
‘‘(B) of a type with respect to which a deduction is
allowable under section 167.
‘‘(2) SPECIFIED TANGIBLE PROPERTY.—
‘‘(A) IN GENERAL.—The term ‘specified tangible property’ means, except as provided in subparagraph (B), any
tangible property used in the production of tested income.
‘‘(B) DUAL USE PROPERTY.—In the case of property used
both in the production of tested income and income which
is not tested income, such property shall be treated as
specified tangible property in the same proportion that
the gross income described in subsection (c)(1)(A) produced
with respect to such property bears to the total gross
income produced with respect to such property.
‘‘(3) DETERMINATION OF ADJUSTED BASIS.—For purposes of
this subsection, notwithstanding any provision of this title (or
any other provision of law) which is enacted after the date
of the enactment of this section, the adjusted basis in any
property shall be determined—
‘‘(A) by using the alternative depreciation system under
section 168(g), and
‘‘(B) by allocating the depreciation deduction with
respect to such property ratably to each day during the
period in the taxable year to which such depreciation
relates.
‘‘(3) PARTNERSHIP PROPERTY.—For purposes of this subsection, if a controlled foreign corporation holds an interest
in a partnership at the close of such taxable year of the controlled foreign corporation, such controlled foreign corporation
shall take into account under paragraph (1) the controlled
foreign corporation’s distributive share of the aggregate of the
partnership’s adjusted bases (determined as of such date in
the hands of the partnership) in tangible property held by
such partnership to the extent such property—
‘‘(A) is used in the trade or business of the partnership,
‘‘(B) is of a type with respect to which a deduction
is allowable under section 167, and
‘‘(C) is used in the production of tested income (determined with respect to such controlled foreign corporation’s
distributive share of income with respect to such property).
For purposes of this paragraph, the controlled foreign corporation’s distributive share of the adjusted basis of any property
shall be the controlled foreign corporation’s distributive share
of income with respect to such property.
‘‘(4) REGULATIONS.—The Secretary shall issue such regulations or other guidance as the Secretary determines appropriate
to prevent the avoidance of the purposes of this subsection,
including regulations or other guidance which provide for the
treatment of property if—
‘‘(A) such property is transferred, or held, temporarily,
or
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131 STAT. 2211
‘‘(B) the avoidance of the purposes of this paragraph
is a factor in the transfer or holding of such property.
‘‘(e) DETERMINATION OF PRO RATA SHARE, ETC.—For purposes
of this section—
‘‘(1) IN GENERAL.—The pro rata shares referred to in subsections (b), (c)(1)(A), and (c)(1)(B), respectively, shall be determined under the rules of section 951(a)(2) 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 ends.
‘‘(2) TREATMENT AS UNITED STATES SHAREHOLDER.—A person shall be treated as a United States shareholder of a controlled foreign corporation for any taxable year of such person
only if such person owns (within the meaning of section 958(a))
stock in such foreign corporation on the last day in the taxable
year of such foreign corporation on which such foreign corporation is a controlled foreign corporation.
‘‘(3) 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 year.
‘‘(f) TREATMENT AS SUBPART F INCOME FOR CERTAIN PURPOSES.—
‘‘(1) IN GENERAL.—
‘‘(A) APPLICATION.—Except as provided in subparagraph (B), any global intangible low-taxed income included
in gross income under subsection (a) shall be treated in
the same manner as an amount included under section
951(a)(1)(A) for purposes of applying sections 168(h)(2)(B),
535(b)(10), 851(b), 904(h)(1), 959, 961, 962, 993(a)(1)(E),
996(f)(1),
1248(b)(1),
1248(d)(1),
6501(e)(1)(C),
6654(d)(2)(D), and 6655(e)(4).
‘‘(B) EXCEPTION.—The Secretary shall provide rules for
the application of subparagraph (A) 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 corporation.
‘‘(2) ALLOCATION OF GLOBAL INTANGIBLE LOW-TAXED INCOME
TO CONTROLLED FOREIGN CORPORATIONS.—For purposes of the
sections referred to in paragraph (1), with respect to any controlled foreign corporation any pro rata amount from which
is taken into account in determining the global intangible lowtaxed income included in gross income of a United States
shareholder under subsection (a), the portion of such global
intangible low-taxed income which is treated as being with
respect to such controlled foreign corporation is—
‘‘(A) in the case of a controlled foreign corporation
with no tested income, zero, and
‘‘(B) in the case of a controlled foreign corporation
with tested income, the portion of such global intangible
low-taxed income which bears the same ratio to such global
intangible low-taxed income as—
‘‘(i) such United States shareholder’s pro rata
amount of the tested income of such controlled foreign
corporation, bears to
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26 USC 960.
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‘‘(ii) the aggregate amount described in subsection
(c)(1)(A) with respect to such United States shareholder.’’.
(b) FOREIGN TAX CREDIT.—
(1) APPLICATION OF DEEMED PAID FOREIGN TAX CREDIT.—
Section 960 is amended adding at the end the following new
subsection:
‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY ATTRIBUTABLE
TO TESTED INCOME.—
‘‘(1) IN GENERAL.—For purposes of subpart A of this part,
if any amount is includible in the gross income of a domestic
corporation under section 951A, such domestic corporation shall
be deemed to have paid foreign income taxes equal to 80 percent
of the product of—
‘‘(A) such domestic corporation’s inclusion percentage,
multiplied by
‘‘(B) the aggregate tested foreign income taxes paid
or accrued by controlled foreign corporations.
‘‘(2) INCLUSION PERCENTAGE.—For purposes of paragraph
(1), the term ‘inclusion percentage’ means, with respect to any
domestic corporation, the ratio (expressed as a percentage)
of—
‘‘(A) such corporation’s global intangible low-taxed
income (as defined in section 951A(b)), divided by
‘‘(B) the aggregate amount described in section
951A(c)(1)(A) with respect to such corporation.
‘‘(3) TESTED FOREIGN INCOME TAXES.—For purposes of paragraph (1), the term ‘tested foreign income taxes’ means, with
respect to any domestic corporation which is a United States
shareholder of a controlled foreign corporation, 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 951A.’’.
(2) APPLICATION OF FOREIGN TAX CREDIT LIMITATION.—
(A) SEPARATE BASKET FOR GLOBAL INTANGIBLE LOWTAXED INCOME.—Section 904(d)(1) is amended by redesignating subparagraphs (A) and (B) as subparagraphs (B)
and (C), respectively, and by inserting before subparagraph
(B) (as so redesignated) the following new subparagraph:
‘‘(A) any amount includible in gross income under section 951A (other than passive category income),’’.
(B) EXCLUSION FROM GENERAL CATEGORY INCOME.—
Section 904(d)(2)(A)(ii) is amended by inserting ‘‘income
described in paragraph (1)(A) and’’ before ‘‘passive category
income’’.
(C) NO CARRYOVER OR CARRYBACK OF EXCESS TAXES.—
Section 904(c) is amended by adding at the end the following: ‘‘This subsection shall not apply to taxes paid or
accrued with respect to amounts described in subsection
(d)(1)(A).’’.
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131 STAT. 2213
(c) CLERICAL AMENDMENT.—The table of sections for subpart
F of part III of subchapter N of chapter 1 is amended by inserting
after the item relating to section 951 the following new item:
26 USC 951 prec.
‘‘Sec. 951A. Global intangible low-taxed income included in gross income of United
States shareholders.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years of foreign corporations beginning after
December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.
26 USC 904 note.
SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME
AND GLOBAL INTANGIBLE LOW-TAXED INCOME.
(a) IN GENERAL.—Part VIII of subchapter B of chapter 1 is
amended by adding at the end the following new section:
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‘‘SEC. 250. FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL
INTANGIBLE LOW-TAXED INCOME.
26 USC 250.
‘‘(a) ALLOWANCE OF DEDUCTION.—
‘‘(1) IN GENERAL.—In the case of a domestic corporation
for any taxable year, there shall be allowed as a deduction
an amount equal to the sum of—
‘‘(A) 37.5 percent of the foreign-derived intangible
income of such domestic corporation for such taxable year,
plus
‘‘(B) 50 percent of—
‘‘(i) the global intangible low-taxed income amount
(if any) which is included in the gross income of such
domestic corporation under section 951A for such taxable year, and
‘‘(ii) the amount treated as a dividend received
by such corporation under section 78 which is attributable to the amount described in clause (i).
‘‘(2) LIMITATION BASED ON TAXABLE INCOME.—
‘‘(A) IN GENERAL.—If, for any taxable year—
‘‘(i) 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 (1), exceeds
‘‘(ii) the taxable income of the domestic corporation
(determined without regard to this section),
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 (B).
‘‘(B) REDUCTION.—For purposes of subparagraph (A)—
‘‘(i) foreign-derived intangible income shall be
reduced by an amount which bears the same ratio
to the excess described in subparagraph (A) as such
foreign-derived intangible income bears to the sum
described in subparagraph (A)(i), and
‘‘(ii) the global intangible low-taxed income amount
shall be reduced by the remainder of such excess.
‘‘(3) REDUCTION IN DEDUCTION FOR TAXABLE YEARS AFTER
2025.—In the case of any taxable year beginning after December
31, 2025, paragraph (1) shall be applied by substituting—
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131 STAT. 2214
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(A) ‘21.875 percent’ for ‘37.5 percent’ in subparagraph
(A), and
‘‘(B) ‘37.5 percent’ for ‘50 percent’ in subparagraph
(B).
‘‘(b) FOREIGN-DERIVED INTANGIBLE INCOME.—For purposes of
this section—
‘‘(1) 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—
‘‘(A) the foreign-derived deduction eligible income of
such corporation, bears to
‘‘(B) the deduction eligible income of such corporation.
‘‘(2) DEEMED INTANGIBLE INCOME.—For purposes of this
subsection—
‘‘(A) IN GENERAL.—The term ‘deemed intangible
income’ means the excess (if any) of—
‘‘(i) the deduction eligible income of the domestic
corporation, over
‘‘(ii) the deemed tangible income return of the corporation.
‘‘(B) DEEMED TANGIBLE INCOME RETURN.—The term
‘deemed tangible income return’ means, with respect to
any corporation, an amount equal to 10 percent of the
corporation’s qualified business asset investment (as
defined in section 951A(d), determined by substituting
‘deduction eligible income’ for ‘tested income’ in paragraph
(2) thereof and without regard to whether the corporation
is a controlled foreign corporation).
‘‘(3) DEDUCTION ELIGIBLE INCOME.—
‘‘(A) IN GENERAL.—The term ‘deduction eligible income’
means, with respect to any domestic corporation, the excess
(if any) of—
‘‘(i) gross income of such corporation determined
without regard to—
‘‘(I) any amount included in the gross income
of such corporation under section 951(a)(1),
‘‘(II) the global intangible low-taxed income
included in the gross income of such corporation
under section 951A,
‘‘(III) any financial services income (as defined
in section 904(d)(2)(D)) of such corporation,
‘‘(IV) any dividend received from a corporation
which is a controlled foreign corporation of such
domestic corporation,
‘‘(V) any domestic oil and gas extraction
income of such corporation, and
‘‘(VI) any foreign branch income (as defined
in section 904(d)(2)(J)), over
‘‘(ii) the deductions (including taxes) properly allocable to such gross income.
‘‘(B) DOMESTIC OIL AND GAS EXTRACTION INCOME.—For
purposes of subparagraph (A), the term ‘domestic oil and
gas extraction income’ means income described in section
907(c)(1), determined by substituting ‘within the United
States’ for ‘without the United States’.
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PUBLIC LAW 115–97—DEC. 22, 2017
131 STAT. 2215
‘‘(4) FOREIGN-DERIVED DEDUCTION ELIGIBLE INCOME.—The
term ‘foreign-derived deduction eligible income’ means, with
respect to any taxpayer for any taxable year, any deduction
eligible income of such taxpayer which is derived in connection
with—
‘‘(A) property—
‘‘(i) which is sold by the taxpayer to any person
who is not a United States person, and
‘‘(ii) which the taxpayer establishes to the satisfaction of the Secretary is for a foreign use, or
‘‘(B) services provided by the taxpayer which the taxpayer establishes to the satisfaction of the Secretary are
provided to any person, or with respect to property, not
located within the United States.
‘‘(5) RULES RELATING TO FOREIGN USE PROPERTY OR SERVICES.—For purposes of this subsection—
‘‘(A) FOREIGN USE.—The term ‘foreign use’ means any
use, consumption, or disposition which is not within the
United States.
‘‘(B) PROPERTY OR SERVICES PROVIDED TO DOMESTIC
INTERMEDIARIES.—
‘‘(i) PROPERTY.—If a taxpayer sells property to
another person (other than a related party) for further
manufacture or other modification within the United
States, such property shall not be treated as sold for
a foreign use even if such other person subsequently
uses such property for a foreign use.
‘‘(ii) SERVICES.—If a taxpayer provides services to
another person (other than a related party) located
within the United States, such services shall not be
treated as described in paragraph (4)(B) even if such
other person uses such services in providing services
which are so described.
‘‘(C) SPECIAL RULES WITH RESPECT TO RELATED PARTY
TRANSACTIONS.—
‘‘(i) SALES TO RELATED PARTIES.—If property is sold
to a related party who is not a United States person,
such sale shall not be treated as for a foreign use
unless—
‘‘(I) such property is ultimately sold by a
related party, or used by a related party in connection with property which is sold or the provision
of services, to another person who is an unrelated
party who is not a United States person, and
‘‘(II) the taxpayer establishes to the satisfaction of the Secretary that such property is for
a foreign use.
For purposes of this clause, a sale of property shall
be treated as a sale of each of the components thereof.
‘‘(ii) SERVICE PROVIDED TO RELATED PARTIES.—If
a service is provided to a related party who is not
located in the United States, such service shall not
be treated described in subparagraph (A)(ii) 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 States.
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131 STAT. 2216
26 USC 172.
26 USC 241 prec.
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(D) RELATED PARTY.—For purposes of this paragraph,
the term ‘related party’ means any member of an affiliated
group as defined in section 1504(a), determined—
‘‘(i) by substituting ‘more than 50 percent’ for ‘at
least 80 percent’ each place it appears, and
‘‘(ii) without regard to paragraphs (2) and (3) of
section 1504(b).
Any person (other than a corporation) shall be treated
as a member of such group if such person is controlled
by members of such group (including any entity treated
as a member of such group by reason of this sentence)
or controls any such member. For purposes of the preceding
sentence, control shall be determined under the rules of
section 954(d)(3).
‘‘(E) SOLD.—For purposes of this subsection, the terms
‘sold’, ‘sells’, and ‘sale’ shall include any lease, license,
exchange, or other disposition.
‘‘(c) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to
carry out the provisions of this section.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 172(d), as amended by this Act, is amended
by adding at the end the following new paragraph:
‘‘(9) DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE
INCOME.—The deduction under section 250 shall not be
allowed.’’.
(2) Section 246(b)(1) is amended—
(A) by striking ‘‘and subsection (a) and (b) of section
245’’ the first place it appears and inserting ‘‘, subsection
(a) and (b) of section 245, and section 250’’,
(B) by striking ‘‘and subsection (a) and (b) of section
245’’ the second place it appears and inserting ‘‘subsection
(a) and (b) of section 245, and 250’’.
(3) Section 469(i)(3)(F)(iii) is amended by striking ‘‘and
222’’ and inserting ‘‘222, and 250’’.
(4) The table of sections for part VIII of subchapter B
of chapter 1 is amended by adding at the end the following
new item:
‘‘Sec. 250. Foreign-derived intangible income and global intangible low-taxed income.’’.
26 USC 172 note.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
CHAPTER 2—OTHER MODIFICATIONS OF SUBPART F
PROVISIONS
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SEC. 14211. ELIMINATION OF INCLUSION OF FOREIGN BASE COMPANY
OIL RELATED INCOME.
(a) REPEAL.—Subsection (a) of section 954 is amended—
(1) by inserting ‘‘and’’ at the end of paragraph (2),
(2) by striking the comma at the end of paragraph (3)
and inserting a period, and
(3) by striking paragraph (5).
(b) CONFORMING AMENDMENTS.—
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131 STAT. 2217
(1) Section 952(c)(1)(B)(iii) is amended by striking subclause
(I) and redesignating subclauses (II) through (V) as subclauses
(I) through (IV), respectively.
(2) Section 954(b) is amended—
(A) by striking the second sentence of paragraph (4),
(B) by striking ‘‘the foreign base company services
income, and the foreign base company oil related income’’
in paragraph (5) and inserting ‘‘and the foreign base company services income’’, and
(C) by striking paragraph (6).
(3) Section 954 is amended by striking subsection (g).
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years of foreign corporations beginning after
December 31, 2017, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.
26 USC 952.
26 USC 952 note.
SEC. 14212. REPEAL OF INCLUSION BASED ON WITHDRAWAL OF PREVIOUSLY EXCLUDED SUBPART F INCOME FROM QUALIFIED INVESTMENT.
(a) IN GENERAL.—Subpart F of part III of subchapter N of
chapter 1 is amended by striking section 955.
(b) CONFORMING AMENDMENTS.—
(1)(A) Section 951(a)(1)(A) is amended to read as follows:
‘‘(A) his pro rata share (determined under paragraph
(2)) of the corporation’s subpart F income for such year,
and’’.
(B) Section 851(b) is amended by striking ‘‘section
951(a)(1)(A)(i)’’ in the flush language at the end and inserting
‘‘section 951(a)(1)(A)’’.
(C) Section 952(c)(1)(B)(i) is amended by striking ‘‘section
951(a)(1)(A)(i)’’ and inserting ‘‘section 951(a)(1)(A)’’.
(D) Section 953(c)(1)(C) is amended by striking ‘‘section
951(a)(1)(A)(i)’’ and inserting ‘‘section 951(a)(1)(A)’’.
(2) Section 951(a) is amended by striking paragraph (3).
(3) Section 953(d)(4)(B)(iv)(II) is amended by striking ‘‘or
amounts referred to in clause (ii) or (iii) of section 951(a)(1)(A)’’.
(4) Section 964(b) is amended by striking ‘‘, 955,’’.
(5) Section 970 is amended by striking subsection (b).
(6) The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by striking the item relating
to section 955.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years of foreign corporations beginning after
December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.
26 USC 951 prec.
26 USC 851 note.
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SEC. 14213. MODIFICATION OF STOCK ATTRIBUTION RULES FOR
DETERMINING STATUS AS A CONTROLLED FOREIGN
CORPORATION.
(a) IN GENERAL.—Section 958(b) is amended—
(1) by striking paragraph (4), and
(2) by striking ‘‘Paragraphs (1) and (4)’’ in the last sentence
and inserting ‘‘Paragraph (1)’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to—
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PUBLIC LAW 115–97—DEC. 22, 2017
(1) the last taxable year of foreign corporations beginning
before January 1, 2018, and each subsequent taxable year
of such foreign corporations, and
(2) taxable years of United States shareholders in which
or with which such taxable years of foreign corporations end.
SEC. 14214. MODIFICATION OF DEFINITION OF UNITED STATES SHAREHOLDER.
26 USC 951.
26 USC 951 note.
(a) IN GENERAL.—Section 951(b) is amended by inserting ‘‘,
or 10 percent or more of the total value of shares of all classes
of stock of such foreign corporation’’ after ‘‘such foreign corporation’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years of foreign corporations beginning after
December 31, 2017, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.
SEC. 14215. ELIMINATION OF REQUIREMENT THAT CORPORATION
MUST BE CONTROLLED FOR 30 DAYS BEFORE SUBPART
F INCLUSIONS APPLY.
26 USC 951 note.
(a) IN GENERAL.—Section 951(a)(1) is amended by striking ‘‘for
an uninterrupted period of 30 days or more’’ and inserting ‘‘at
any time’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years of foreign corporations beginning after
December 31, 2017, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.
CHAPTER 3—PREVENTION OF BASE EROSION
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SEC. 14221. LIMITATIONS ON INCOME SHIFTING THROUGH INTANGIBLE PROPERTY TRANSFERS.
(a) DEFINITION OF INTANGIBLE ASSET.—Section 936(h)(3)(B) is
amended—
(1) by striking ‘‘or’’ at the end of clause (v),
(2) by striking clause (vi) and inserting the following:
‘‘(vi) any goodwill, going concern value, or
workforce in place (including its composition and terms
and conditions (contractual or otherwise) of its employment); or
‘‘(vii) any other item the value or potential value
of which is not attributable to tangible property or
the services of any individual.’’, and
(3) by striking the flush language after clause (vii), as
added by paragraph (2).
(b) CLARIFICATION OF ALLOWABLE VALUATION METHODS.—
(1) FOREIGN CORPORATIONS.—Section 367(d)(2) is amended
by adding at the end the following new subparagraph:
‘‘(D) REGULATORY AUTHORITY.—For purposes of the last
sentence of subparagraph (A), the Secretary shall require—
‘‘(i) the valuation of transfers of intangible property, including intangible property transferred with
other property or services, on an aggregate basis, or
‘‘(ii) the valuation of such a transfer on the basis
of the realistic alternatives to such a transfer,
if the Secretary determines that such basis is the most
reliable means of valuation of such transfers.’’.
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131 STAT. 2219
(2) ALLOCATION AMONG TAXPAYERS.—Section 482 is
amended by adding at the end the following: ‘‘For purposes
of this section, the Secretary shall require the valuation of
transfers of intangible property (including intangible property
transferred with other property or services) on an aggregate
basis or the valuation of such a transfer on the basis of the
realistic alternatives to such a transfer, if the Secretary determines that such basis is the most reliable means of valuation
of such transfers.’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to transfers in taxable years beginning after
December 31, 2017.
(2) NO INFERENCE.—Nothing in the amendment made by
subsection (a) shall be construed to create any inference with
respect to the application of section 936(h)(3) of the Internal
Revenue Code of 1986, or the authority of the Secretary of
the Treasury to provide regulations for such application, with
respect to taxable years beginning before January 1, 2018.
26 USC 482.
26 USC 367 note.
26 USC 963 note.
SEC. 14222. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED
IN HYBRID TRANSACTIONS OR WITH HYBRID ENTITIES.
(a) IN GENERAL.—Part IX of subchapter B of chapter 1 is
amended by inserting after section 267 the following:
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‘‘SEC. 267A. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED
IN HYBRID TRANSACTIONS OR WITH HYBRID ENTITIES.
26 USC 267A.
‘‘(a) 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 by, or to, a hybrid entity.
‘‘(b) DISQUALIFIED RELATED PARTY AMOUNT.—For purposes of
this section—
‘‘(1) 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—
‘‘(A) 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 tax, or
‘‘(B) such related party is allowed a deduction with
respect to such amount under the tax law of such country.
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 951(a).
‘‘(2) RELATED PARTY.—The term ‘related party’ means a
related person as defined in section 954(d)(3), except that such
section shall be applied with respect to the person making
the payment described in paragraph (1) in lieu of the controlled
foreign corporation otherwise referred to in such section.
‘‘(c) HYBRID TRANSACTION.—For purposes of this section, the
term ‘hybrid transaction’ means any transaction, series of transactions, agreement, 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 tax.
‘‘(d) HYBRID ENTITY.—For purposes of this section, the term
‘hybrid entity’ means any entity which is either—
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26 USC 261 prec.
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(1) 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 tax, or
‘‘(2) treated as fiscally transparent for purposes of such
tax law but not so treated for purposes of this chapter.
‘‘(e) REGULATIONS.—The Secretary shall issue such regulations
or other guidance as may be necessary or appropriate to carry
out the purposes of this section, including regulations or other
guidance providing for—
‘‘(1) rules for treating certain conduit arrangements which
involve a hybrid transaction or a hybrid entity as subject to
subsection (a),
‘‘(2) rules for the application of this section to branches
or domestic entities,
‘‘(3) rules for treating certain structured transactions as
subject to subsection (a),
‘‘(4) rules for treating a tax preference as an exclusion
from income for purposes of applying subsection (b)(1) if such
tax preference has the effect of reducing the generally
applicable statutory rate by 25 percent or more,
‘‘(5) 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 amount,
‘‘(6) 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 country,
‘‘(7) exceptions from subsection (a) with respect to—
‘‘(A) 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 purposes, and
‘‘(B) other cases which the Secretary determines do
not present a risk of eroding the Federal tax base,
‘‘(8) requirements for record keeping and information
reporting in addition to any requirements imposed by section
6038A.’’.
(b) CONFORMING AMENDMENT.—The table of sections for part
IX of subchapter B of chapter 1 is amended by inserting after
the item relating to section 267 the following new item:
‘‘Sec. 267A. Certain related party amounts paid or accrued in hybrid transactions
or with hybrid entities.’’.
26 USC 267A
note.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
SEC. 14223. SHAREHOLDERS OF SURROGATE FOREIGN CORPORATIONS
NOT ELIGIBLE FOR REDUCED RATE ON DIVIDENDS.
(a) IN GENERAL.—Section 1(h)(11)(C)(iii) is amended—
(1) by striking ‘‘shall not include any foreign corporation’’
and inserting ‘‘shall not include—
‘‘(I) any foreign corporation’’,
(2) by striking the period at the end and inserting ‘‘, and’’,
and
(3) by adding at the end the following new subclause:
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26 USC 1.
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131 STAT. 2221
‘‘(II) any corporation which first becomes a
surrogate foreign corporation (as defined in section
7874(a)(2)(B)) after the date of the enactment of
this subclause, other than a foreign corporation
which is treated as a domestic corporation under
section 7874(b).’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to dividends received after the date of the enactment
of this Act.
26 USC 1 note.
Subpart C—Modifications Related to Foreign Tax
Credit System
SEC. 14301. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX CREDITS;
DETERMINATION OF SECTION 960 CREDIT ON CURRENT
YEAR BASIS.
(a) REPEAL OF SECTION 902 INDIRECT FOREIGN TAX CREDITS.—
Subpart A of part III of subchapter N of chapter 1 is amended
by striking section 902.
(b) DETERMINATION OF SECTION 960 CREDIT ON CURRENT YEAR
BASIS.—Section 960, as amended by section 14201, is amended—
(1) by striking subsection (c), by redesignating subsection
(b) as subsection (c), by striking all that precedes subsection
(c) (as so redesignated) and inserting the following:
26 USC 902.
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‘‘SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLUSIONS.
‘‘(a) IN GENERAL.—For purposes of subpart A of this part,
if there is included in the gross income of a domestic corporation
any item of income under section 951(a)(1) with respect to any
controlled foreign corporation with respect to which such domestic
corporation is a United States shareholder, 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 income.
‘‘(b) SPECIAL RULES FOR DISTRIBUTIONS FROM PREVIOUSLY
TAXED EARNINGS AND PROFITS.—For purposes of subpart A of this
part—
‘‘(1) 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
959(a), such domestic corporation shall be deemed to have
paid so much of such foreign corporation’s foreign income taxes
as—
‘‘(A) are properly attributable to such portion, and
‘‘(B) have not been deemed to have to been paid by
such domestic corporation under this section for the taxable
year or any prior taxable year.
‘‘(2) TIERED CONTROLLED FOREIGN CORPORATIONS.—If section 959(b) applies to any portion of a distribution from a
controlled foreign corporation to another controlled foreign corporation, such controlled foreign corporation shall be deemed
to have paid so much of such other controlled foreign corporation’s foreign income taxes as—
‘‘(A) are properly attributable to such portion, and
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26 USC 78.
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(B) have not been deemed to have been paid by a
domestic corporation under this section for the taxable
year or any prior taxable year.’’,
(2) and by adding after subsection (d) (as added by section
14201) the following new subsections:
‘‘(e) FOREIGN INCOME TAXES.—The term ‘foreign income taxes’
means any income, war profits, or excess profits taxes paid or
accrued to any foreign country or possession of the United States.
‘‘(f) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to
carry out the provisions of this section.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 78 is amended to read as follows:
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‘‘SEC. 78. 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 (relating to foreign tax credit)
for any taxable year, an amount equal to the taxes deemed to
be paid by such corporation under subsections (a), (b), and (d)
of section 960 (determined without regard to the phrase ‘80 percent
of’ in subsection (d)(1) thereof) for such taxable year shall be treated
for purposes of this title (other than sections 245 and 245A) as
a dividend received by such domestic corporation from the foreign
corporation.’’.
(2) Paragraph (4) of section 245(a) is amended to read
as follows:
‘‘(4) POST-1986 UNDISTRIBUTED EARNINGS.—The term ‘post1986 undistributed earnings’ means the amount of the earnings
and profits of the foreign corporation (computed in accordance
with sections 964(a) and 986) accumulated in taxable years
beginning after December 31, 1986—
‘‘(A) as of the close of the taxable year of the foreign
corporation in which the dividend is distributed, and
‘‘(B) without diminution by reason of dividends distributed during such taxable year.’’.
(3) Section 245(a)(10)(C) is amended by striking ‘‘902, 907,
and 960’’ and inserting ‘‘907 and 960’’.
(4) Sections 535(b)(1) and 545(b)(1) are each amended by
striking ‘‘section 902(a) or 960(a)(1)’’ and inserting ‘‘section
960’’.
(5) Section 814(f)(1) is amended—
(A) by striking subparagraph (B), and
(B) by striking all that precedes ‘‘No income’’ and
inserting the following:
‘‘(1) TREATMENT OF FOREIGN TAXES.—’’.
(6) Section 865(h)(1)(B) is amended by striking ‘‘902, 907,’’
and inserting ‘‘907’’.
(7) Section 901(a) is amended by striking ‘‘sections 902
and 960’’ and inserting ‘‘section 960’’.
(8) Section 901(e)(2) is amended by striking ‘‘but is not
limited to—’’ and all that follows through ‘‘that portion’’ and
inserting ‘‘but is not limited to that portion’’.
(9) Section 901(f) is amended by striking ‘‘sections 902
and 960’’ and inserting ‘‘section 960’’.
(10) Section 901(j)(1)(A) is amended by striking ‘‘902 or’’.
(11) Section 901(j)(1)(B) is amended by striking ‘‘sections
902 and 960’’ and inserting ‘‘section 960’’.
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131 STAT. 2223
(12) Section 901(k)(2) is amended by striking ‘‘, 902,’’.
(13) Section 901(k)(6) is amended by striking ‘‘902 or’’.
(14) Section 901(m)(1)(B) is amended to read as follows:
‘‘(B) in the case of a foreign income tax paid by a
foreign corporation, shall not be taken into account for
purposes of section 960.’’.
(15) Section 904(d)(2)(E) is amended—
(A) by amending clause (i) to read as follows:
‘‘(i) NONCONTROLLED 10-PERCENT OWNED FOREIGN
CORPORATION.—The term ‘noncontrolled 10-percent
owned foreign corporation’ means any foreign corporation which is—
‘‘(I) a specified 10-percent owned foreign corporation (as defined in section 245A(b)), or
‘‘(II) a passive foreign investment company (as
defined in section 1297(a)) with respect to which
the taxpayer meets the stock ownership requirements of section 902(a) (or, for purposes of applying
paragraphs (3) and (4), the requirements of section
902(b)).
A controlled foreign corporation shall not be treated
as a noncontrolled 10-percent owned foreign corporation with respect to any distribution out of its earnings
and profits for periods during which it was a controlled
foreign corporation. Any reference to section 902 in
this clause shall be treated as a reference to such
section as in effect before its repeal.’’, and
(B) by striking ‘‘non-controlled section 902 corporation’’
in clause (ii) and inserting ‘‘noncontrolled 10-percent owned
foreign corporation’’.
(16) Section 904(d)(4) is amended—
(A) by striking ‘‘noncontrolled section 902 corporation’’
each place it appears and inserting ‘‘noncontrolled 10-percent owned foreign corporation’’,
(B) by striking ‘‘NONCONTROLLED SECTION 902 CORPORATIONS’’ in the heading thereof and inserting ‘‘NONCONTROLLED 10-PERCENT OWNED FOREIGN CORPORATIONS’’.
(17) Section 904(d)(6)(A) is amended by striking ‘‘902, 907,’’
and inserting ‘‘907’’.
(18) Section 904(h)(10)(A) is amended by striking ‘‘sections
902, 907, and 960’’ and inserting ‘‘sections 907 and 960’’.
(19) Section 904(k) is amended to read as follows:
‘‘(k) CROSS REFERENCES.—For increase of limitation under subsection (a) for taxes paid with respect to amounts received which
were included in the gross income of the taxpayer for a prior
taxable year as a United States shareholder with respect to a
controlled foreign corporation, see section 960(c).’’.
(20) Section 905(c)(1) is amended by striking the last sentence.
(21) Section 905(c)(2)(B)(i) is amended to read as follows:
‘‘(i) shall be taken into account for the taxable
year to which such taxes relate, and’’.
(22) Section 906(a) is amended by striking ‘‘(or deemed,
under section 902, paid or accrued during the taxable year)’’.
(23) Section 906(b) is amended by striking paragraphs (4)
and (5).
(24) Section 907(b)(2)(B) is amended by striking ‘‘902 or’’.
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PUBLIC LAW 115–97—DEC. 22, 2017
(25) Section 907(c)(3)(A) is amended—
(A) by striking subparagraph (A) and inserting the
following:
‘‘(A) interest, to the extent the category of income of
such interest is determined under section 904(d)(3),’’, and
(B) by striking ‘‘section 960(a)’’ in subparagraph (B)
and inserting ‘‘section 960’’.
(26) Section 907(c)(5) is amended by striking ‘‘902 or’’.
(27) Section 907(f)(2)(B)(i) is amended by striking ‘‘902
26 USC 907.
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or’’.
(28) Section 908(a) is amended by striking ‘‘902 or’’.
(29) Section 909(b) is amended—
(A) by striking ‘‘section 902 corporation’’ in the matter
preceding paragraph (1) and inserting ‘‘specified 10-percent
owned foreign corporation (as defined in section 245A(b)
without regard to paragraph (2) thereof)’’,
(B) by striking ‘‘902 or’’ in paragraph (1),
(C) by striking ‘‘by such section 902 corporation’’ and
all that follows in the matter following paragraph (2) and
inserting ‘‘by such specified 10-percent owned foreign corporation or a domestic corporation which is a United States
shareholder with respect to such specified 10-percent owned
foreign corporation.’’, and
(D) by striking ‘‘SECTION 902 CORPORATIONS’’ in the
heading thereof and inserting ‘‘SPECIFIED 10-PERCENT
OWNED FOREIGN CORPORATIONS’’.
(30) Section 909(d) is amended by striking paragraph (5).
(31) Section 958(a)(1) is amended by striking ‘‘960(a)(1)’’
and inserting ‘‘960’’.
(32) Section 959(d) is amended by striking ‘‘Except as provided in section 960(a)(3), any’’ and inserting ‘‘Any’’.
(33) Section 959(e) is amended by striking ‘‘section 960(b)’’
and inserting ‘‘section 960(c)’’.
(34) Section 1291(g)(2)(A) is amended by striking ‘‘any distribution—’’ and all that follows through ‘‘but only if’’ and
inserting ‘‘any distribution, any withholding tax imposed with
respect to such distribution, but only if’’.
(35) Section 1293(f) is amended by striking ‘‘and’’ at the
end of paragraph (1), by striking the period at the end of
paragraph (2) and inserting ‘‘, and’’, and by adding at the
end the following new paragraph:
‘‘(3) a domestic corporation which owns (or is treated under
section 1298(a) as owning) stock of a qualified electing fund
shall be treated in the same manner as a United States shareholder of a controlled foreign corporation (and such qualified
electing fund shall be treated in the same manner as such
controlled foreign corporation) if such domestic corporation
meets the stock ownership requirements of subsection (a) or
(b) of section 902 (as in effect before its repeal) with respect
to such qualified electing fund.’’.
(36) Section 6038(c)(1)(B) is amended by striking ‘‘sections
902 (relating to foreign tax credit for corporate stockholder
in foreign corporation) and 960 (relating to special rules for
foreign tax credit)’’ and inserting ‘‘section 960’’.
(37) Section 6038(c)(4) is amended by striking subparagraph (C).
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131 STAT. 2225
(38) The table of sections for subpart A of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 902.
(39) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 960 and inserting the following:
26 USC 901 prec.
26 USC 951 prec.
‘‘Sec. 960. Deemed paid credit for subpart F inclusions.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years of foreign corporations beginning after
December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.
26 USC 78 note.
SEC. 14302. SEPARATE FOREIGN TAX CREDIT LIMITATION BASKET FOR
FOREIGN BRANCH INCOME.
(a) IN GENERAL.—Section 904(d)(1), as amended by section
14201, is amended by redesignating subparagraphs (B) and (C)
as subparagraphs (C) and (D), respectively, and by inserting after
subparagraph (A) the following new subparagraph:
‘‘(B) foreign branch income,’’.
(b) FOREIGN BRANCH INCOME.—
(1) IN GENERAL.—Section 904(d)(2) is amended by inserting
after subparagraph (I) the following new subparagraph:
‘‘(J) FOREIGN BRANCH INCOME.—
‘‘(i) IN GENERAL.—The term ‘foreign branch income’
means the business profits of such United States person which are attributable to 1 or more qualified business units (as defined in section 989(a)) in 1 or more
foreign countries. For purposes of the preceding sentence, the amount of business profits attributable to
a qualified business unit shall be determined under
rules established by the Secretary.
‘‘(ii) EXCEPTION.—Such term shall not include any
income which is passive category income.’’.
(2) CONFORMING AMENDMENT.—Section 904(d)(2)(A)(ii), as
amended by section 14201, is amended by striking ‘‘income
described in paragraph (1)(A) and’’ and inserting ‘‘income
described in paragraph (1)(A), foreign branch income, and’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 904.
26 USC 904 note.
SEC. 14303. SOURCE OF INCOME FROM SALES OF INVENTORY DETERMINED SOLELY ON BASIS OF PRODUCTION ACTIVITIES.
(a) IN GENERAL.—Section 863(b) is amended by adding at the
end the following: ‘‘Gains, profits, and income from the sale or
exchange of inventory property described in paragraph (2) 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 property.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 863 note.
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SEC. 14304. ELECTION TO INCREASE PERCENTAGE OF DOMESTIC TAXABLE INCOME OFFSET BY OVERALL DOMESTIC LOSS
TREATED AS FOREIGN SOURCE.
(a) IN GENERAL.—Section 904(g) is amended by adding at the
end the following new paragraph:
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PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(5) ELECTION TO INCREASE PERCENTAGE OF TAXABLE
INCOME TREATED AS FOREIGN SOURCE.—
‘‘(A) IN GENERAL.—If any pre-2018 unused overall
26 USC 904 note.
domestic loss is taken into account under paragraph (1)
for any applicable taxable year, the taxpayer may elect
to have such paragraph applied to such loss by substituting
a percentage greater than 50 percent (but not greater than
100 percent) for 50 percent in subparagraph (B) thereof.
‘‘(B) PRE-2018 UNUSED OVERALL DOMESTIC LOSS.—For
purposes of this paragraph, the term ‘pre-2018 unused
overall domestic loss’ means any overall domestic loss
which—
‘‘(i) arises in a qualified taxable year beginning
before January 1, 2018, and
‘‘(ii) has not been used under paragraph (1) for
any taxable year beginning before such date.
‘‘(C) APPLICABLE TAXABLE YEAR.—For purposes of this
paragraph, the term ‘applicable taxable year’ means any
taxable year of the taxpayer beginning after December
31, 2017, and before January 1, 2028.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2017.
PART II—INBOUND TRANSACTIONS
SEC. 14401. BASE EROSION AND ANTI-ABUSE TAX.
26 USC 59A prec.
(a) IMPOSITION OF TAX.—Subchapter A of chapter 1 is amended
by adding at the end the following new part:
‘‘PART VII—BASE EROSION AND ANTI-ABUSE
TAX
‘‘Sec. 59A. Tax on base erosion payments of taxpayers with substantial gross receipts.
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26 USC 59A.
‘‘SEC. 59A. TAX ON BASE EROSION PAYMENTS OF TAXPAYERS WITH
SUBSTANTIAL GROSS RECEIPTS.
‘‘(a) 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 year. Such tax shall
be in addition to any other tax imposed by this subtitle.
‘‘(b) BASE EROSION MINIMUM TAX AMOUNT.—For purposes of
this section—
‘‘(1) IN GENERAL.—Except as provided in paragraphs (2)
and (3), the term ‘base erosion minimum tax amount’ means,
with respect to any applicable taxpayer for any taxable year,
the excess (if any) of—
‘‘(A) an amount equal to 10 percent (5 percent in the
case of taxable years beginning in calendar year 2018)
of the modified taxable income of such taxpayer for the
taxable year, over
‘‘(B) an amount equal to the regular tax liability (as
defined in section 26(b)) of the taxpayer for the taxable
year, reduced (but not below zero) by the excess (if any)
of—
‘‘(i) the credits allowed under this chapter against
such regular tax liability, over
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131 STAT. 2227
‘‘(ii) the sum of—
‘‘(I) the credit allowed under section 38 for
the taxable year which is properly allocable to
the research credit determined under section 41(a),
plus
‘‘(II) the portion of the applicable section 38
credits not in excess of 80 percent of the lesser
of the amount of such credits or the base erosion
minimum tax amount (determined without regard
to this subclause).
‘‘(2) MODIFICATIONS FOR TAXABLE YEARS BEGINNING AFTER
the case of any taxable year beginning after December
31, 2025, paragraph (1) shall be applied—
‘‘(A) by substituting ‘12.5 percent’ for ‘10 percent’ in
subparagraph (A) thereof, and
‘‘(B) by reducing (but not below zero) the regular tax
liability (as defined in section 26(b)) for purposes of
subparagraph (B) thereof by the aggregate amount of the
credits allowed under this chapter against such regular
tax liability rather than the excess described in such
subparagraph.
‘‘(3) INCREASED RATE FOR CERTAIN BANKS AND SECURITIES
DEALERS.—
‘‘(A) IN GENERAL.—In the case of a taxpayer described
in subparagraph (B) who is an applicable taxpayer for
any taxable year, the percentage otherwise in effect under
paragraphs (1)(A) and (2)(A) shall each be increased by
one percentage point.
‘‘(B) TAXPAYER DESCRIBED.—A taxpayer is described
in this subparagraph if such taxpayer is a member of
an affiliated group (as defined in section 1504(a)(1)) which
includes—
‘‘(i) a bank (as defined in section 581), or
‘‘(ii) a registered securities dealer under section
15(a) of the Securities Exchange Act of 1934.
‘‘(4) APPLICABLE SECTION 38 CREDITS.—For purposes of paragraph (1)(B)(ii)(II), the term ‘applicable section 38 credits’
means the credit allowed under section 38 for the taxable
year which is properly allocable to—
‘‘(A) the low-income housing credit determined under
section 42(a),
‘‘(B) the renewable electricity production credit determined under section 45(a), and
‘‘(C) the investment credit determined under section
46, but only to the extent properly allocable to the energy
credit determined under section 48.
‘‘(c) MODIFIED TAXABLE INCOME.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘modified taxable income’
means the taxable income of the taxpayer computed under
this chapter for the taxable year, determined without regard
to—
‘‘(A) any base erosion tax benefit with respect to any
base erosion payment, or
‘‘(B) the base erosion percentage of any net operating
loss deduction allowed under section 172 for the taxable
year.
‘‘(2) BASE EROSION TAX BENEFIT.—
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2025.—In
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131 STAT. 2228
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(A) IN GENERAL.—The term ‘base erosion tax benefit’
means—
‘‘(i) any deduction described in subsection (d)(1)
which is allowed under this chapter for the taxable
year with respect to any base erosion payment,
‘‘(ii) in the case of a base erosion payment described
in subsection (d)(2), any deduction allowed under this
chapter for the taxable year for depreciation (or
amortization in lieu of depreciation) with respect to
the property acquired with such payment,
‘‘(iii) in the case of a base erosion payment
described in subsection (d)(3)—
‘‘(I) any reduction under section 803(a)(1)(B)
in the gross amount of premiums and other consideration on insurance and annuity contracts for
premiums and other consideration arising out of
indemnity insurance, and
‘‘(II) any deduction under section 832(b)(4)(A)
from the amount of gross premiums written on
insurance contracts during the taxable year for
premiums paid for reinsurance, and
‘‘(iv) in the case of a base erosion payment
described in subsection (d)(4), 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 chapter.
‘‘(B) TAX BENEFITS DISREGARDED IF TAX WITHHELD ON
BASE EROSION PAYMENT.—
‘‘(i) IN GENERAL.—Except as provided in clause
(ii), any base erosion tax benefit attributable to any
base erosion payment—
‘‘(I) on which tax is imposed by section 871
or 881, and
‘‘(II) with respect to which tax has been
deducted and withheld under section 1441 or 1442,
shall not be taken into account in computing modified
taxable income under paragraph (1)(A) or the base
erosion percentage under paragraph (4).
‘‘(ii) EXCEPTION.—The amount not taken into
account in computing modified taxable income by reason of clause (i) shall be reduced under rules similar
to the rules under section 163(j)(5)(B) (as in effect
before the date of the enactment of the Tax Cuts and
Jobs Act).
‘‘(3) SPECIAL RULES FOR DETERMINING INTEREST FOR WHICH
DEDUCTION ALLOWED.—For purposes of applying paragraph (1),
in the case of a taxpayer to which section 163(j) applies for
the taxable year, 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 parties.
‘‘(4) BASE EROSION PERCENTAGE.—For purposes of paragraph (1)(B)—
‘‘(A) IN GENERAL.—The term ‘base erosion percentage’
means, for any taxable year, the percentage determined
by dividing—
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‘‘(i) the aggregate amount of base erosion tax benefits of the taxpayer for the taxable year, by
‘‘(ii) the sum of—
‘‘(I) the aggregate amount of the deductions
(including deductions described in clauses (i) and
(ii) of paragraph (2)(A)) allowable to the taxpayer
under this chapter for the taxable year, plus
‘‘(II) the base erosion tax benefits described
in clauses (iii) and (iv) of paragraph (2)(A) allowable to the taxpayer for the taxable year.
‘‘(B) CERTAIN ITEMS NOT TAKEN INTO ACCOUNT.—The
amount under subparagraph (A)(ii) shall be determined
by not taking into account—
‘‘(i) any deduction allowed under section 172, 245A,
or 250 for the taxable year,
‘‘(ii) any deduction for amounts paid or accrued
for services to which the exception under subsection
(d)(5) applies, and
‘‘(iii) any deduction for qualified derivative payments which are not treated as a base erosion payment
by reason of subsection (h).
‘‘(d) BASE EROSION PAYMENT.—For purposes of this section—
‘‘(1) 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 chapter.
‘‘(2) 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
for depreciation (or amortization in lieu of depreciation).
‘‘(3) REINSURANCE PAYMENTS.—Such term shall also include
any premium or other consideration paid or accrued by the
taxpayer to a foreign person which is a related party of the
taxpayer for any reinsurance payments which are taken into
account under sections 803(a)(1)(B) or 832(b)(4)(A).
‘‘(4) CERTAIN PAYMENTS TO EXPATRIATED ENTITIES.—
‘‘(A) IN GENERAL.—Such term shall also include any
amount paid or accrued by the taxpayer with respect to
a person described in subparagraph (B) which results in
a reduction of the gross receipts of the taxpayer.
‘‘(B) PERSON DESCRIBED.—A person is described in this
subparagraph if such person is a—
‘‘(i) surrogate foreign corporation which is a related
party of the taxpayer, but only if such person first
became a surrogate foreign corporation after November
9, 2017, or
‘‘(ii) foreign person which is a member of the same
expanded affiliated group as the surrogate foreign corporation.
‘‘(C) DEFINITIONS.—For purposes of this paragraph—
‘‘(i) SURROGATE FOREIGN CORPORATION.—The term
‘surrogate foreign corporation’ has the meaning given
such term by section 7874(a)(2)(B) but does not include
a foreign corporation treated as a domestic corporation
under section 7874(b).
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131 STAT. 2230
PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(ii) EXPANDED AFFILIATED GROUP.—The term
‘expanded affiliated group’ has the meaning given such
term by section 7874(c)(1).
‘‘(5) EXCEPTION FOR CERTAIN AMOUNTS WITH RESPECT TO
SERVICES.—Paragraph (1) shall not apply to any amount paid
or accrued by a taxpayer for services if—
‘‘(A) such services are services which meet the requirements for eligibility for use of the services cost method
under section 482 (determined without regard to the
requirement that the services not contribute significantly
to fundamental risks of business success or failure), and
‘‘(B) such amount constitutes the total services cost
with no markup component.
‘‘(e) APPLICABLE TAXPAYER.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘applicable taxpayer’ means,
with respect to any taxable year, a taxpayer—
‘‘(A) which is a corporation other than a regulated
investment company, a real estate investment trust, or
an S corporation,
‘‘(B) the average annual gross receipts of which for
the 3-taxable-year period ending with the preceding taxable
year are at least $500,000,000, and
‘‘(C) the base erosion percentage (as determined under
subsection (c)(4)) of which for the taxable year is 3 percent
(2 percent in the case of a taxpayer described in subsection
(b)(3)(B)) or higher.
‘‘(2) GROSS RECEIPTS.—
‘‘(A) 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 (1)(B), 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 account. In the case of a taxpayer which is
a foreign person, 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 (3).
‘‘(B) OTHER RULES MADE APPLICABLE.—Rules similar
to the rules of subparagraphs (B), (C), and (D) of section
448(c)(3) shall apply in determining gross receipts for purposes of this section.
‘‘(3) AGGREGATION RULES.—All persons treated as a single
employer under subsection (a) of section 52 shall be treated
as 1 person for purposes of this subsection and subsection
(c)(4), except that in applying section 1563 for purposes of
section 52, the exception for foreign corporations under section
1563(b)(2)(C) shall be disregarded.
‘‘(f) FOREIGN PERSON.—For purposes of this section, the term
‘foreign person’ has the meaning given such term by section
6038A(c)(3).
‘‘(g) RELATED PARTY.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘related party’ means, with
respect to any applicable taxpayer—
‘‘(A) any 25-percent owner of the taxpayer,
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‘‘(B) any person who is related (within the meaning
of section 267(b) or 707(b)(1)) to the taxpayer or any 25percent owner of the taxpayer, and
‘‘(C) any other person who is related (within the
meaning of section 482) to the taxpayer.
‘‘(2) 25-PERCENT OWNER.—The term ‘25-percent owner’
means, with respect to any corporation, any person who owns
at least 25 percent of—
‘‘(A) the total voting power of all classes of stock of
a corporation entitled to vote, or
‘‘(B) the total value of all classes of stock of such
corporation.
‘‘(3) SECTION 318 TO APPLY.—Section 318 shall apply for
purposes of paragraphs (1) and (2), except that—
‘‘(A) ‘10 percent’ shall be substituted for ‘50 percent’
in section 318(a)(2)(C), and
‘‘(B) subparagraphs (A), (B), and (C) of section 318(a)(3)
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 person.
‘‘(h) EXCEPTION FOR CERTAIN PAYMENTS MADE IN THE ORDINARY
COURSE OF TRADE OR BUSINESS.—For purposes of this section—
‘‘(1) IN GENERAL.—Except as provided in paragraph (3),
any qualified derivative payment shall not be treated as a
base erosion payment.
‘‘(2) QUALIFIED DERIVATIVE PAYMENT.—
‘‘(A) IN GENERAL.—The term ‘qualified derivative payment’ means any payment made by a taxpayer pursuant
to a derivative with respect to which the taxpayer—
‘‘(i) recognizes gain or loss as if such derivative
were sold for its fair market value on the last business
day of the taxable year (and such additional times
as required by this title or the taxpayer’s method of
accounting),
‘‘(ii) treats any gain or loss so recognized as ordinary, and
‘‘(iii) treats the character of all items of income,
deduction, gain, or loss with respect to a payment
pursuant to the derivative as ordinary.
‘‘(B) REPORTING REQUIREMENT.—No payments shall be
treated as qualified derivative payments under subparagraph (A) for any taxable year unless the taxpayer includes
in the information required to be reported under section
6038B(b)(2) with respect to such taxable year such information as is necessary to identify the payments to be so
treated and such other information as the Secretary determines necessary to carry out the provisions of this subsection.
‘‘(3) EXCEPTIONS FOR PAYMENTS OTHERWISE TREATED AS
BASE EROSION PAYMENTS.—This subsection shall not apply to
any qualified derivative payment if—
‘‘(A) the payment would be treated as a base erosion
payment if it were not made pursuant to a derivative,
including any interest, royalty, or service payment, or
‘‘(B) in the case of a contract which has derivative
and nonderivative components, the payment is properly
allocable to the nonderivative component.
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131 STAT. 2232
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26 USC 6038A.
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PUBLIC LAW 115–97—DEC. 22, 2017
‘‘(4) DERIVATIVE DEFINED.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘derivative’ means any
contract (including any option, forward contract, futures
contract, short position, swap, or similar contract) the value
of which, or any payment or other transfer with respect
to which, is (directly or indirectly) determined by reference
to one or more of the following:
‘‘(i) Any share of stock in a corporation.
‘‘(ii) Any evidence of indebtedness.
‘‘(iii) Any commodity which is actively traded.
‘‘(iv) Any currency.
‘‘(v) Any rate, price, amount, index, formula, or
algorithm.
Such term shall not include any item described in clauses
(i) through (v).
‘‘(B) TREATMENT OF AMERICAN DEPOSITORY RECEIPTS
AND SIMILAR INSTRUMENTS.—Except as otherwise provided
by the Secretary, for purposes of this part, American depository receipts (and similar instruments) with respect to
shares of stock in foreign corporations shall be treated
as shares of stock in such foreign corporations.
‘‘(C) EXCEPTION FOR CERTAIN CONTRACTS.—Such term
shall not include any insurance, annuity, or endowment
contract issued by an insurance company to which subchapter L applies (or issued by any foreign corporation
to which such subchapter would apply if such foreign corporation were a domestic corporation).
‘‘(i) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to
carry out the provisions of this section, including regulations—
‘‘(1) providing for such adjustments to the application of
this section as are necessary to prevent the avoidance of the
purposes of this section, including through—
‘‘(A) the use of unrelated persons, conduit transactions,
or other intermediaries, or
‘‘(B) transactions or arrangements designed, in whole
or in part—
‘‘(i) to characterize payments otherwise subject to
this section as payments not subject to this section,
or
‘‘(ii) to substitute payments not subject to this
section for payments otherwise subject to this section
and
‘‘(2) for the application of subsection (g), including rules
to prevent the avoidance of the exceptions under subsection
(g)(3).’’.
(b) REPORTING REQUIREMENTS AND PENALTIES.—
(1) IN GENERAL.—Subsection (b) of section 6038A is
amended to read as follows:
‘‘(b) REQUIRED INFORMATION.—
‘‘(1) IN GENERAL.—For purposes of subsection (a), the
information described in this subsection is such information
as the Secretary prescribes by regulations relating to—
‘‘(A) the name, principal place of business, nature of
business, and country or countries in which organized or
resident, of each person which—
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‘‘(i) is a related party to the reporting corporation,
and
‘‘(ii) had any transaction with the reporting corporation during its taxable year,
‘‘(B) the manner in which the reporting corporation
is related to each person referred to in subparagraph (A),
and
‘‘(C) transactions between the reporting corporation
and each foreign person which is a related party to the
reporting corporation.
‘‘(2) ADDITIONAL INFORMATION REGARDING BASE EROSION
PAYMENTS.—For purposes of subsection (a) and section 6038C,
if the reporting corporation or the foreign corporation to whom
section 6038C applies is an applicable taxpayer, the information
described in this subsection shall include—
‘‘(A) such information as the Secretary determines necessary to determine the base erosion minimum tax amount,
base erosion payments, and base erosion tax benefits of
the taxpayer for purposes of section 59A for the taxable
year, and
‘‘(B) such other information as the Secretary determines necessary to carry out such section.
For purposes of this paragraph, any term used in this paragraph which is also used in section 59A shall have the same
meaning as when used in such section.’’.
(2) INCREASE IN PENALTY.—Paragraphs (1) and (2) of section
6038A(d) are each amended by striking ‘‘$10,000’’ and inserting
‘‘$25,000’’.
(c) DISALLOWANCE OF CREDITS AGAINST BASE EROSION TAX.—
Paragraph (2) of section 26(b) is amended by inserting after
subparagraph (A) the following new subparagraph:
‘‘(B) section 59A (relating to base erosion and antiabuse tax),’’.
(d) CONFORMING AMENDMENTS.—
(1) The table of parts for subchapter A of chapter 1 is
amended by adding after the item relating to part VI the
following new item:
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‘‘PART VII. BASE EROSION
AND
26 USC 6038A.
26 USC 1 prec.
ANTI-ABUSE TAX’’.
(2) Paragraph (1) of section 882(a), as amended by this
Act, is amended by inserting ‘‘or 59A,’’ after ‘‘section 11,’’.
(3) Subparagraph (A) of section 6425(c)(1), as amended
by section 13001, is amended to read as follows:
‘‘(A) the sum of—
‘‘(i) the tax imposed by section 11, or subchapter
L of chapter 1, whichever is applicable, plus
‘‘(ii) the tax imposed by section 59A, over’’.
(4)(A) Subparagraph (A) of section 6655(g)(1), as amended
by sections 12001 and 13001, is amended by striking ‘‘plus’’
at the end of clause (i), by redesignating clause (ii) as clause
(iii), and by inserting after clause (i) the following new clause:
‘‘(ii) the tax imposed by section 59A, plus’’.
(B) Subparagraphs (A)(i) and (B)(i) of section 6655(e)(2),
as amended by sections 12001 and 13001, are each amended
by inserting ‘‘and modified taxable income’’ after ‘‘taxable
income’’.
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(C) Subparagraph (B) of section 6655(e)(2) is amended by
adding at the end the following new clause:
‘‘(iii) MODIFIED TAXABLE INCOME.—The term ‘modified taxable income’ has the meaning given such term
by section 59A(c)(1).’’.
(e) EFFECTIVE DATE.—The amendments made by this section
shall apply to base erosion payments (as defined in section 59A(d)
of the Internal Revenue Code of 1986, as added by this section)
paid or accrued in taxable years beginning after December 31,
2017.
PART III—OTHER PROVISIONS
SEC. 14501. RESTRICTION ON INSURANCE BUSINESS EXCEPTION TO
PASSIVE FOREIGN INVESTMENT COMPANY RULES.
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(a) IN GENERAL.—Section 1297(b)(2)(B) is amended to read
as follows:
‘‘(B) derived in the active conduct of an insurance
business by a qualifying insurance corporation (as defined
in subsection (f)),’’.
(b) QUALIFYING INSURANCE CORPORATION DEFINED.—Section
1297 is amended by adding at the end the following new subsection:
‘‘(f) QUALIFYING INSURANCE CORPORATION.—For purposes of
subsection (b)(2)(B)—
‘‘(1) IN GENERAL.—The term ‘qualifying insurance corporation’ means, with respect to any taxable year, a foreign corporation—
‘‘(A) which would be subject to tax under subchapter
L if such corporation were a domestic corporation, and
‘‘(B) the applicable insurance liabilities of which constitute more than 25 percent of its total assets, 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 year.
‘‘(2) ALTERNATIVE FACTS AND CIRCUMSTANCES TEST FOR CERTAIN CORPORATIONS.—If a corporation fails to qualify as a qualified insurance corporation under paragraph (1) solely because
the percentage determined under paragraph (1)(B) is 25 percent
or less, a United States person that owns stock in such corporation may elect to treat such stock as stock of a qualifying
insurance corporation if—
‘‘(A) the percentage so determined for the corporation
is at least 10 percent, and
‘‘(B) under regulations provided by the Secretary, based
on the applicable facts and circumstances—
‘‘(i) the corporation is predominantly engaged in
an insurance business, and
‘‘(ii) such failure is due solely to runoff-related
or rating-related circumstances involving such insurance business.
‘‘(3) APPLICABLE INSURANCE LIABILITIES.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—The term ‘applicable insurance
liabilities’ means, with respect to any life or property and
casualty insurance business—
‘‘(i) loss and loss adjustment expenses, and
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‘‘(ii) reserves (other than deficiency, contingency,
or unearned premium reserves) for life and health
insurance risks and life and health insurance claims
with respect to contracts providing coverage for mortality or morbidity risks.
‘‘(B) LIMITATIONS ON AMOUNT OF LIABILITIES.—Any
amount determined under clause (i) or (ii) of subparagraph
(A) shall not exceed the lesser of such amount—
‘‘(i) as reported to the applicable insurance regulatory body in the applicable financial statement
described in paragraph (4)(A) (or, if less, the amount
required by applicable law or regulation), or
‘‘(ii) as determined under regulations prescribed
by the Secretary.
‘‘(4) OTHER DEFINITIONS AND RULES.—For purposes of this
subsection—
‘‘(A) APPLICABLE FINANCIAL STATEMENT.—The term
‘applicable financial statement’ means a statement for
financial reporting purposes which—
‘‘(i) is made on the basis of generally accepted
accounting principles,
‘‘(ii) is made on the basis of international financial
reporting standards, but only if there is no statement
that meets the requirement of clause (i), or
‘‘(iii) except as otherwise provided by the Secretary
in regulations, is the annual statement which is
required to be filed with the applicable insurance regulatory body, but only if there is no statement which
meets the requirements of clause (i) or (ii).
‘‘(B) APPLICABLE INSURANCE REGULATORY BODY.—The
term ‘applicable insurance regulatory body’ means, with
respect to any insurance business, the entity established
by law to license, authorize, or regulate such business
and to which the statement described in subparagraph
(A) is provided.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 1297
note.
SEC. 14502. REPEAL OF FAIR MARKET VALUE METHOD OF INTEREST
EXPENSE APPORTIONMENT.
(a) IN GENERAL.—Paragraph (2) of section 864(e) is amended
to read as follows:
‘‘(2) 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 income.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2017.
26 USC 864.
26 USC 864 note.
TITLE II
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SEC. 20001. OIL AND GAS PROGRAM.
(a) DEFINITIONS.—In this section:
(1) COASTAL PLAIN.—The term ‘‘Coastal Plain’’ means the
area identified as the 1002 Area on the plates prepared by
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the United States Geological Survey entitled ‘‘ANWR Map –
Plate 1’’ and ‘‘ANWR Map – Plate 2’’, dated October 24, 2017,
and on file with the United States Geological Survey and the
Office of the Solicitor of the Department of the Interior.
(2) SECRETARY.—The term ‘‘Secretary’’ means the Secretary
of the Interior, acting through the Bureau of Land Management.
(b) OIL AND GAS PROGRAM.—
(1) IN GENERAL.—Section 1003 of the Alaska National
Interest Lands Conservation Act (16 U.S.C. 3143) shall not
apply to the Coastal Plain.
(2) ESTABLISHMENT.—
(A) IN GENERAL.—The Secretary shall establish and
administer a competitive oil and gas program for the
leasing, development, production, and transportation of oil
and gas in and from the Coastal Plain.
(B) PURPOSES.—Section 303(2)(B) of the Alaska
National Interest Lands Conservation Act (Public Law 96–
487; 94 Stat. 2390) is amended—
(i) in clause (iii), by striking ‘‘and’’ at the end;
(ii) in clause (iv), by striking the period at the
end and inserting ‘‘; and’’; and
(iii) by adding at the end the following:
‘‘(v) to provide for an oil and gas program on
the Coastal Plain.’’.
(3) MANAGEMENT.—Except as otherwise provided in this
section, the Secretary shall manage the oil and gas program
on the Coastal Plain in a manner similar to the administration
of lease sales under the Naval Petroleum Reserves Production
Act of 1976 (42 U.S.C. 6501 et seq.) (including regulations).
(4) ROYALTIES.—Notwithstanding the Mineral Leasing Act
(30 U.S.C. 181 et seq.), the royalty rate for leases issued pursuant to this section shall be 16.67 percent.
(5) RECEIPTS.—Notwithstanding the Mineral Leasing Act
(30 U.S.C. 181 et seq.), of the amount of adjusted bonus, rental,
and royalty receipts derived from the oil and gas program
and operations on Federal land authorized under this section—
(A) 50 percent shall be paid to the State of Alaska;
and
(B) the balance shall be deposited into the Treasury
as miscellaneous receipts.
(c) 2 LEASE SALES WITHIN 10 YEARS.—
(1) REQUIREMENT.—
(A) IN GENERAL.—Subject to subparagraph (B), the Secretary shall conduct not fewer than 2 lease sales areawide under the oil and gas program under this section
by not later than 10 years after the date of enactment
of this Act.
(B) SALE ACREAGES; SCHEDULE.—
(i) ACREAGES.—The Secretary shall offer for lease
under the oil and gas program under this section—
(I) not fewer than 400,000 acres area-wide
in each lease sale; and
(II) those areas that have the highest potential
for the discovery of hydrocarbons.
(ii) SCHEDULE.—The Secretary shall offer—
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(I) the initial lease sale under the oil and
gas program under this section not later than 4
years after the date of enactment of this Act; and
(II) a second lease sale under the oil and gas
program under this section not later than 7 years
after the date of enactment of this Act.
(2) RIGHTS-OF-WAY.—The Secretary shall issue any rightsof-way or easements across the Coastal Plain for the exploration, development, production, or transportation necessary
to carry out this section.
(3) SURFACE DEVELOPMENT.—In administering this section,
the Secretary shall authorize up to 2,000 surface acres of Federal land on the Coastal Plain to be covered by production
and support facilities (including airstrips and any area covered
by gravel berms or piers for support of pipelines) during the
term of the leases under the oil and gas program under this
section.
SEC. 20002. LIMITATIONS ON AMOUNT OF DISTRIBUTED QUALIFIED
OUTER CONTINENTAL SHELF REVENUES.
Section 105(f)(1) of the Gulf of Mexico Energy Security Act
of 2006 (43 U.S.C. 1331 note; Public Law 109–432) is amended
by striking ‘‘exceed $500,000,000 for each of fiscal years 2016
through 2055.’’ and inserting the following: ‘‘exceed—
‘‘(A) $500,000,000 for each of fiscal years 2016 through
2019;
‘‘(B) $650,000,000 for each of fiscal years 2020 and
2021; and
‘‘(C) $500,000,000 for each of fiscal years 2022 through
2055.’’.
SEC. 20003. STRATEGIC PETROLEUM RESERVE DRAWDOWN AND SALE.
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(a) DRAWDOWN AND SALE.—
(1) IN GENERAL.—Notwithstanding section 161 of the
Energy Policy and Conservation Act (42 U.S.C. 6241), except
as provided in subsections (b) and (c), the Secretary of Energy
shall draw down and sell from the Strategic Petroleum Reserve
7,000,000 barrels of crude oil during the period of fiscal years
2026 through 2027.
(2) DEPOSIT OF AMOUNTS RECEIVED FROM SALE.—Amounts
received from a sale under paragraph (1) shall be deposited
in the general fund of the Treasury during the fiscal year
in which the sale occurs.
(b) EMERGENCY PROTECTION.—The Secretary of Energy shall
not draw down and sell crude oil under subsection (a) in a quantity
that would limit the authority to sell petroleum products under
subsection (h) of section 161 of the Energy Policy and Conservation
Act (42 U.S.C. 6241) in the full quantity authorized by that subsection.
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(c) LIMITATION.—The Secretary of Energy shall not drawdown
or conduct sales of crude oil under subsection (a) after the date
on which a total of $600,000,000 has been deposited in the general
fund of the Treasury from sales authorized under that subsection.
dkrause on DSKBC28HB2PROD with PUBLAWS
Approved December 22, 2017.
LEGISLATIVE HISTORY—H.R. 1 (S. 1):
HOUSE REPORTS: Nos. 115–409 (Comm. on Ways and Means) and 115–466
(Comm. of Conference).
CONGRESSIONAL RECORD, Vol. 163 (2017):
Nov. 15, 16, considered and passed House.
Nov. 29–Dec. 1, considered and passed Senate, amended.
Dec. 19, House agreed to conference report. Senate sustained point of order
against conference report; receded from its amendment and concurred with
an amendment.
Dec. 20, House concurred in Senate amendment.
DAILY COMPILATION OF PRESIDENTIAL DOCUMENTS (2017):
Dec. 22, Presidential remarks.
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PUBL097
| File Type | application/pdf |
| File Title | PUBL097.PS |
| File Modified | 2018-11-06 |
| File Created | 2018-10-30 |