Welcome Back Letter

Dear Friends,

Happy New Year! I hope the New Year finds you all in good health and that you have all had a wonderful Holiday Season.

Tax Season is here once more. I am sure you are compiling your Income Tax Information so that together we can prepare your 2017 Income Tax Return in the most efficient manner possible. If you have any questions please do not hesitate to call me at the numbers to the right of this page.

Many of you will have questions about the tax law reform.  The link below will give you information on the new tax laws. (The Tax Cut and Jobs Act.)

https://www.congress.gov/115/crpt/hrpt466/CRPT-115hrpt466.pdf

Beginning in 2018 The Affordable Care Act mandate requirements have been repealed . At this point the required insurance forms sent from you employer and your insurance companies are still required.  However, beginning in 2018 there will be no penalty for not having health insurance.  They are trying to come to terms on incentives for having it. 

What this means in short is that you must have the 1095-A before filing only if you were insured through the market place.  All others (1095-B or 1095-C) can provide other proof as long as it agrees with what the insurance companies ultimately send you.

Congratulations to those of you who have had new little tax deductions. Please be sure to bring their Social Security number and Date of Birth with you.

Also congratulations to those of you who have gotten married this year. If you have recently gotten married, do not forget to notify the Social Security Office of any last name changes. If you are planning your appointment without your new spouse, I must have verbal and written permission.  Please bring written permission with a five digit pin number so that we together can act on his/her behalf. It is also necessary for them to be available by phone in case they or I have questions and so that they can be present via cell or Skype for the entire appointment or the evaluation at the end of the appointment .

Those of you who have a business or employee expenses need only to remember one thing. You must have receipts to claim your deductions. Credit card statement are not enough on their own to support a deduction.  I do not need to see the receipts but you have to be able to produce them in an audit, should your account be picked for an accuracy check. Also please bring a paper copy of your list of expenses. I will need a copy for my file and it is much easier to work with than thumb drives and laptops. (The Tax Law is very clear on this issue. A paper copy is required by Law!)

Here at Anderson Income Tax and Accounting Service Inc. you can continue to count on a safe, honest, accurate accounting of your Personal or Business Tax Returns.

The following are Highlights of the 2017 Tax Law Changes that began in 2014. Please keep in mind that these are only the highlights. There were way to many changes to mention them all. This should however be helpful information while you are gathering your Income Tax Documents for filing your Tax Year 2017 Return and Tax Planning for 2018. There are a lot of cool changes this year. 😉  Go to Tax Appointment Checklist to make sure that you have not forgotten anything pertinent to preparing your return.

Please call at your earliest convenience to set your appointment @ 813-766-1040.

I look forward to seeing all of you,

Barbara Anderson EA, NTPI Fellow

 

Below are Highlights from our new Tax Reform

TITLE I—INDIVIDUAL TAX REFORM—Continued

8. Repeal of deduction for alimony payments and corresponding

inclusion in gross income (sec. 1309 of the

House bill and secs. 61, 71, and 215 of the Code) ……………. 277

9. Repeal of deduction for moving expenses (sec. 1310 of the

House bill, sec. 11050 of the Senate amendment, and sec.

217 of the Code) …………………………………………………………….. 278

10. Termination of deduction and exclusions for contributions

to medical savings accounts (sec. 1311 of the House bill,

secs. 106(b) and 220 of the Code) ……………………………………. 279

11. Denial of deduction for performing artists and certain officials;

Modification of deduction for educator expenses (sec.

1312 of the House bill, sec. 11032 of the Senate amendment

and sec. 62 of the Code) ………………………………………… 281

12. Suspension of exclusion for qualified bicycle commuting

reimbursement (sec. 11048 of the Senate amendment and

secs. 132(f) of the Code) …………………………………………………. 282

13. Limitation on exclusion for employer-provided housing (sec.

1401 of the House bill and sec. 119 of the Code) ……………… 283

14. Modification of exclusion of gain on sale of a principal

residence (sec. 1402 of the House bill, sec. 11047 of the

Senate amendment, and sec. 121 of the Code) ………………… 284

15. Sunset of exclusion for dependent care assistance programs

(sec. 1404 of the House bill and sec. 129 of the Code) ……… 285

16. Repeal of exclusion for qualified moving expense reimbursement

(sec. 1405 of the House bill, sec. 11049 of the

Senate amendment, and sec. 132(g) of the Code) …………….. 286

17. Repeal of exclusion for adoption assistance programs (sec.

1406 of the House bill and sec. 137 of the Code) ……………… 286

E. Simplification and Reform of Savings, Pensions, Retirement ……. 288

1. Repeal of special rule permitting recharacterization of IRA

contributions (sec. 1501 of the House bill, sec. 13611 of

the Senate amendment, and sec. 408A of the Code) ………… 288

2. Reduction in minimum age for allowable in-service distributions

(sec. 1502 of the House bill and secs. 401 and 457

of the Code) …………………………………………………………………… 291

3. Modification of rules governing hardship distributions (sec.

1503 of the House bill and secs. 401 and 403 of the Code) .. 292

4. Modification of rules relating to hardship withdrawals from

cash or deferred arrangements (sec. 1504 of the bill, sec.

11033(c) of the Senate amendment, and sec. 401 of the

Code) …………………………………………………………………………….. 293

5. Extended rollover period for the rollover of plan loan offset

amounts in certain cases (sec. 1505 of the bill, sec. 13613

of the Senate amendment, and sec. 402 of the Code) ……….. 294

6. Modification of nondiscrimination rules for certain plans

providing benefits or contributions to older, longer service

participants (sec. 1506 of the House bill and sec. 401 of

the Code) ………………………………………………………………………. 296

7. Modification of rules applicable to length of service award

programs for bona fide public safety volunteers (sec. 13612

of the Senate amendment and sec. 457(e) of the Code) ……. 306

F. Modifications to Estate, Gift, and Generation-Skipping Transfers

Taxes (secs 1601 and 1602 of the House bill, sec. 11061 of

the Senate amendment, and secs. 2001 and 2010 of the Code) .. 307

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TITLE I—INDIVIDUAL TAX REFORM—Continued

G. Alternative Minimum Tax (sec. 2001 of the House bill, sec.

12001 of the Senate amendment, and secs. 53 and 55–59 of

the Code) …………………………………………………………………………….. 317

H. Elimination of Shared Responsibility Payment for Individuals

Failing to Maintain Minimal Essential Coverage (sec. 11081

of the Senate amendment and sec. 5000A of the Code) ………….. 323

I. Other Provisions ……………………………………………………………………… 325

1. Temporarily allow increased contributions to ABLE accounts,

and allow contributions to be eligible for saver’s

credit (sec. 11024 of the Senate amendment and sec. 529A

of the Code) …………………………………………………………………… 325

2. Extension of time limit for contesting IRS levy (sec. 11071

of the Senate amendment and secs. 6343 and 6532 of

the Code) ………………………………………………………………………. 329

3. Treatment of certain individuals performing services in the

Sinai Peninsula of Egypt (sec. 11026 of the Senate amendment

and secs. 2, 112, 692, 2201, 3401, 4253, 6013, and

7508 of the Code) …………………………………………………………… 330

4. Modifications of user fees requirements for installment

agreements (sec. 11073 of the Senate amendment and new

sec. 6159(f) of the Code) …………………………………………………. 331

5. Relief for 2016 disaster areas (sec. 11029 of the Senate

amendment and secs. 72(t), 165, 401-403, 408, 457, and

3405 of the Code) …………………………………………………………… 332

6. Attorneys’ fees relating to awards to whistleblowers (sec.

11078 of the Senate amendment and sec. 62(a)(21) of the

Code) …………………………………………………………………………….. 335

7. Clarification of whistleblower awards (sec. 11079 of the Senate

amendment and new sec. 7623(c) of the Code) …………… 336

8. Exclusion from gross income of certain amounts received

by wrongly incarcerated individuals (sec. 11027 of the Senate

amendment and sec. 139F of the Code) …………………….. 340

BUSINESS TAX REFORM …………………………………………………………………………. 341

A. Tax Rates ………………………………………………………………………………. 341

1. Reduction in corporate tax rate (sec. 3001 of the House

bill, secs. 13001 and 13002 of the Senate amendment,

and secs. 11 and 243 of the Code) …………………………………… 341

B. Cost Recovery ………………………………………………………………………… 346

1. Increased expensing (sec. 3101 of the House bill, secs. 13201

and 13311 of the Senate amendment, and sec. 168(k) of

the Code) ………………………………………………………………………. 346

2. Modifications to depreciation limitations on luxury automobiles

and personal use property (sec. 13202 of the Senate

amendment and sec. 280F of the Code) …………………….. 357

3. Modifications of treatment of certain farm property (sec.

13203 of the Senate amendment and sec. 168 of the Code) 360

4. Applicable recovery period for real property (sec. 13204 of

the Senate amendment and sec. 168 of the Code) ……………. 362

5. Use of alternative depreciation system for electing farming

businesses (sec. 13205 of the Senate amendment and sec.

168 of the Code) …………………………………………………………….. 367

6. Expensing of certain costs of replanting citrus plants lost

by reason of casualty (sec. 13207 of the Senate amendment

and sec. 263A of the Code) …………………………………………….. 370

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VII

BUSINESS TAX REFORM—Continued

C. Small Business Reforms …………………………………………………………. 372

1. Expansion of section 179 expensing (sec. 3201 of the House

bill, sec. 13101 of the Senate amendment, and sec. 179

of the Code) …………………………………………………………………… 372

2. Small business accounting method reform and simplification

(sec. 3202 of the House bill, secs. 13102 through 13105

of the Senate amendment, and secs. 263A, 448, 460, and

471 of the Code) …………………………………………………………….. 375

3. Modification of treatment of S corporation conversions to

C corporations (sec. 3204 of the House bill, sec. 13543

of the Senate amendment, and secs. 481 and 1371 of the

Code) …………………………………………………………………………….. 382

D. Reform of Business Related Exclusions, Deductions, etc. …………. 385

1. Interest (secs. 3203 and 3301 of the House bill, secs. 13301

and 13311 of the Senate amendment, and sec. 163(j) of

the Code) ………………………………………………………………………. 385

2. Modification of net operating loss deduction (sec. 3302 of

the House bill, sec. 13302 of the Senate amendment, and

sec. 172 of the Code) ……………………………………………………… 393

3. Like-kind exchanges of real property (sec. 3303 of the House

bill, and sec. 13303 of the Senate amendment, and sec.

1031 of the Code) …………………………………………………………… 394

4. Revision of treatment of contributions to capital (sec. 3304

of the House bill and sec. 118 of the Code) ……………………… 397

5. Repeal of deduction for local lobbying expenses (sec. 3305

of the House bill, sec. 13308 of the Senate amendment,

and sec. 162(e) of the Code) ……………………………………………. 399

6. Repeal of deduction for income attributable to domestic production

activities (sec. 3306 of the House bill, sec. 13305

of the Senate amendment, and sec. 199 of the Code) ……….. 400

7. Entertainment, etc. expenses (sec. 3307 of the House bill,

sec. 13304 of the Senate amendment, and sec. 274 of the

Code) …………………………………………………………………………….. 402

8. Repeal of exclusion, etc., for employee achievement awards

(sec. 1403 of the House bill, sec. 13310 of the Senate

amendment, and secs. 74(c) and 274(j) of the Code) ………… 407

9. Unrelated business taxable income increased by amount

of certain fringe benefit expenses for which deduction is

disallowed (sec. 3308 of the House bill and sec. 512 of

the Code) ………………………………………………………………………. 408

10. Limitation on deduction for FDIC premiums (sec. 3309

of the House bill, sec. 13531 of the Senate amendment,

and sec. 162 of the Code) ……………………………………………….. 410

11. Repeal of rollover of publicly traded securities gain into

specialized small business investment companies (sec.

3310 of the House bill and sec. 1044 of the Code) ……………. 412

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

(sec. 3311 of the House bill and sec. 1221 of the Code) ……. 413

13. Repeal of special rule for sale or exchange of patents (sec.

3312 of the House bill and sec. 1235 of the Code)) …………… 414

14. Repeal of technical termination of partnerships (sec. 3313

of the House bill and sec. 708(b) of the Code) ………………….. 415

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VIII

BUSINESS TAX REFORM—Continued

15. Recharacterization of certain gains in the case of partnership

profits interests held in connection with performance

of investment services (sec. 3314 of the House bill, sec.

13310 of the Senate amendment, and secs. 1061 and 83

of the Code) …………………………………………………………………… 416

16. Amortization of research and experimental expenditures

(sec. 3315 of the House bill, sec. 13206 of the Senate

amendment, and sec. 174 of the Code) ……………………………. 423

17. Certain special rules for taxable year of inclusion (sec.

13221 of the Senate amendment and sec. 451 of the Code) 425

18. Denial of deduction for certain fines, penalties, and other

amounts (sec. 13306 of the Senate amendment and sec.

162(f) and new sec. 6050X of the Code) …………………………… 430

19. Denial of deduction for settlements subject to nondisclosure

agreements paid in connection with sexual harassment

or sexual abuse (sec. 13307 of the Senate amendment and

new sec. 162(q) of the Code) …………………………………………… 431

20. Uniform treatment of expenses in contingency fee cases

(sec. 3316 of the House bill and new sec. 162(q) of the

Code) …………………………………………………………………………….. 432

E. Reform of Business Credits …………………………………………………….. 433

1. Repeal of credit for clinical testing expenses for certain

drugs for rare diseases or conditions (sec. 3401 of the

House bill, sec. 13401 of the Senate amendment, and sec.

45C of the Code) ……………………………………………………………. 433

2. Repeal of employer-provided child care credit (sec. 3402

of the House bill and sec. 42F of the Code) ……………………… 434

3. Rehabilitation credit (sec. 3403 of the House bill, sec. 13402

of the Senate amendment, and sec. 47 of the Code) …………. 435

4. Repeal of work opportunity tax credit (sec. 3404 of the

House bill and sec. 51 of the Code) …………………………………. 436

5. Repeal of deduction for certain unused business credits (sec.

3405 of the House bill, sec. 13403 of the Senate amendment,

and sec. 196 of the Code) ……………………………………… 438

6. Termination of new markets tax credit (sec. 3406 of the

House bill and sec. 45D of the Code) ………………………………. 439

7. Repeal of credit for expenditures to provide access to disabled

individuals (sec. 3407 of the House bill and sec.

44 of the Code) ………………………………………………………………. 441

8. Modification of credit for portion of employer social security

taxes paid with respect to employee tips (sec. 3408 of

the House bill and sec. 45B of the Code) …………………………. 442

9. Employer credit for paid family and medical leave (sec.

13403 of the Senate amendment, and new sec. 45S of

the Code) ………………………………………………………………………. 443

F. Energy Credits ………………………………………………………………………. 445

1. Modifications to credit for electricity produced from certain

renewable resources (sec. 3501 of the House bill and sec.

45 of the Code) ………………………………………………………………. 445

2. Modification of the energy investment tax credit (sec. 3502

of the House bill and sec. 48 of the Code) ……………………….. 446

3. Extension and phaseout of residential energy efficient property

credit (sec. 3503 of the House bill and sec. 25D of

the Code) ………………………………………………………………………. 450

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IX

BUSINESS TAX REFORM—Continued

4. Repeal of enhanced oil recovery credit (sec. 3504 of the

House bill and sec. 43 of the Code) …………………………………. 452

5. Repeal of credit for producing oil and gas from marginal

wells (sec. 3505 of the House bill and sec. 45I of the

Code) …………………………………………………………………………….. 452

6. Modification of credit for production from advanced nuclear

power facilities (sec. 3506 of the House bill and sec. 45J

of the Code) …………………………………………………………………… 453

G. Bond Reforms ………………………………………………………………………… 455

1. Termination of private activity bonds (sec. 3601 of the bill

and sec. 103 of the Code) ……………………………………………….. 455

2. Repeal of advance refunding bonds (sec. 3602 of the bill,

sec. 13532 of the Senate amendment, and sec. 149(d) of

the Code) ………………………………………………………………………. 458

3. Repeal of tax credit bonds (sec. 3603 of the bill and secs.

54A, 54B, 54C, 54D, 54E, 54F and 6431 of the Code) ………. 459

4. No tax-exempt bonds for professional stadiums (sec. 3604

of the bill and sec. 103 of the Code) ………………………………… 462

H. Insurance ………………………………………………………………………………. 464

1. Net operating losses of life insurance companies (sec. 3701

of the House bill, sec. 13511 of the Senate amendment,

and sec. 810 of the Code) ……………………………………………….. 464

2. Repeal of small life insurance company deduction (sec. 3702

of the House bill, sec. 13512 of the Senate amendment,

and sec. 806 of the Code) ……………………………………………….. 465

3. Surtax on life insurance company taxable income (sec. 3703

of the House bill and sec. 801 of the Code) ……………………… 466

4. Adjustment for change in computing reserves (sec. 3704

of the House bill, sec. 13513 of the Senate amendment,

and sec. 807 of the Code) ……………………………………………….. 466

5. Repeal of special rule for distributions to shareholders from

pre-1984 policyholders surplus account (sec. 3705 of the

House bill, sec. 13514 of the Senate amendment, and sec.

815 of the Code) …………………………………………………………….. 467

6. Modification of proration rules for property and casualty

insurance companies (sec. 3706 of the House bill, sec.

13515 of the Senate amendment, and sec. 832 of the

Code) …………………………………………………………………………….. 469

7. Modification of discounting rules for property and casualty

insurance companies (sec. 3707 of the House bill and sec.

832 of the Code) …………………………………………………………….. 470

8. Repeal of special estimated tax payments (sec. 3708 of the

House bill, sec. 13516 of the Senate amendment, and sec.

847 of the Code) …………………………………………………………….. 473

9. Computation of life insurance tax reserves (sec. 13517 of

the Senate amendment and sec. 807 of the Code) ……………. 476

10. Modification of rules for life insurance proration for purposes

of determining the dividends received deduction (sec.

13518 of the Senate amendment and sec. 812 of the Code) 479

11. Capitalization of certain policy acquisition expenses (sec.

13519 of the Senate amendment and sec. 848 of the Code) 482

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X

BUSINESS TAX REFORM—Continued

12. Tax reporting for life settlement transactions, clarification

of tax basis of life insurance contracts, and exception to

transfer for valuable consideration rules (secs. 13518

through 13520 of the Senate amendment and secs. 101,

1016, and 6050X of the Code) …………………………………………. 483

I. Compensation …………………………………………………………………………. 486

1. Modification of limitation on excessive employee remuneration

(sec. 3801 of the House bill, sec. 13601 of the Senate

amendment, and sec. 162(m) of the Code) ………………………. 486

2. Excise tax on excess tax-exempt organization executive compensation

(sec. 3802 of the House bill, sec. 13602 of the

Senate amendment, and sec. 4960 of the Code) ………………. 491

3. Treatment of qualified equity grants (sec. 3803 of the House

bill, sec. 13603 of the Senate amendment, and secs. 83,

3401, and 6051 of the Code) …………………………………………… 494

4. Increase in excise tax rate for stock compensation of insiders

in expatriated corporations (sec. 13604 of the Senate

amendment and sec. 4985 of the Code) …………………………… 503

J. Other Provisions …………………………………………………………………….. 509

1. 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 (sec. 13501 of the

Senate amendment and secs. 864(c) and 1446 of the Code) 509

2. Modification of the definition of substantial built-in loss

in the case of transfer of partnership interest (sec. 13502

of the Senate amendment and sec. 743 of the Code) ………… 512

3. Charitable contributions and foreign taxes taken into account

in determining limitation on allowance of partner’s

share of loss (sec. 13503 of the Senate amendment and

sec. 704 of the Code) ……………………………………………………… 513

4. Cost basis of specified securities determined without regard

to identification (sec. 13533 of the Senate amendment and

sec. 1012 of the Code) ……………………………………………………. 515

5. Expansion of qualifying beneficiaries of an electing small

business trust (sec. 13541 of the Senate amendment and

sec. 1361 of the Code) ……………………………………………………. 517

6. Charitable contribution deduction for electing small business

trusts (sec. 13542 of the Senate amendment and sec.

642(c) of the Code) …………………………………………………………. 518

7. Production period for beer, wine, and distilled spirits (sec.

13801 of the Senate amendment and sec. 263A of the

Code) …………………………………………………………………………….. 519

8. Reduced rate of excise tax on beer (sec. 13802 of the Senate

amendment and sec. 5051 of the Code) …………………………… 520

9. Transfer of beer between bonded facilities (sec. 13803 of

the Senate amendment and sec. 5414 of the Code) ………….. 522

10. Reduced rate of excise tax on certain wine (sec. 13804

of the Senate amendment and sec. 5041 of the Code) ………. 524

11. Adjustment of alcohol content level for application of excise

tax rates (sec. 13805 of the Senate amendment and sec.

5041 of the Code) …………………………………………………………… 526

12. Definition of mead and low alcohol by volume wine (sec.

13806 of the Senate amendment and sec. 5041 of the

Code) …………………………………………………………………………….. 527

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BUSINESS TAX REFORM—Continued

13. Reduced rate of excise tax on certain distilled spirits (sec.

13807 of the Senate amendment and sec. 5001 of the

Code) …………………………………………………………………………….. 529

14. Bulk distilled spirits (sec. 13808 of the Senate amendment

and sec. 5212 of the Code) ……………………………………………… 530

15. Modification of tax treatment of Alaska Native Corporations

and Settlement Trusts (sec. 13821 of the Senate

amendment and sec. 6039H and new secs. 139G and 247

of the Code) …………………………………………………………………… 531

16. Amounts paid for aircraft management services (sec. 13822

of the Senate amendment and sec. 4261 of the Code) ………. 534

17. Opportunity zones (sec. 13823 of the Senate amendment

and new secs. 1400Z–1 and 1400Z–2 of the Code) …………… 537

18. Provisions relating to the low-income housing credit (secs.

13411 and 13412 of the Senate amendment and sec. 42

of the Code) …………………………………………………………………… 540

EXEMPT ORGANIZATIONS ………………………………………………………………………. 542

A. Unrelated Business Income Tax ……………………………………………… 542

1. Clarification of unrelated business income tax treatment

of entities exempt from tax under section 501(a) (sec. 5001

of the House bill and sec. 511 of the Code) ……………………… 542

2. Exclusion of research income from unrelated business taxable

income limited to publicly available research (sec.

5002 of the House bill and sec. 512(b)(9) of the Code) ……… 543

3. Unrelated business taxable income separately computed for

each trade or business activity (sec. 13703 of the Senate

amendment and sec. 512(a) of the Code) …………………………. 545

B. Excise Taxes ………………………………………………………………………….. 548

1. Simplification of excise tax on private foundation investment

income (sec. 5101 of the House bill and sec. 4940 of the

Code) …………………………………………………………………………….. 548

2. Private operating foundation requirements relating to operation

of an art museum (sec. 5102 of the House bill and

sec. 4942(j) of the Code) …………………………………………………. 549

3. Excise tax based on investment income of private colleges

and universities (sec. 5103 of the House bill, sec. 13701

of the Senate amendment, and new sec. 4968 of the Code) . 552

4. Provide an exception to the private foundation excess business

holdings rules for philanthropic business holdings

(sec. 5104 of the House bill and sec. 4943 of the Code) ……. 556

C. Requirements for Organizations Exempt From Tax …………………. 559

1. Section 501(c)(3) organizations permitted to make statements

relating to political campaign in ordinary course

of activities in carrying out exempt purpose (sec. 5201

of the House bill and sec. 501 of the Code) ……………………… 559

2. Additional reporting requirements for donor advised fund

sponsoring organizations (sec. 5202 of the House bill and

sec. 6033 of the Code) ……………………………………………………. 561

INTERNATIONAL TAX PROVISIONS ……………………………………………………….. 595

A. Establishment of Participation Exemption System for Taxation

of Foreign Income ………………………………………………………………… 595

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XII

INTERNATIONAL TAX PROVISIONS—Continued

1. Deduction for foreign-source portion of dividends received

by domestic corporations from specified 10-percent owned

foreign corporations (sec. 4001 of the House bill, sec. 14101

of the Senate amendment, and new sec. 245A of the Code) 595

2. Modification of subpart F inclusion for increased investments

in United States property (sec. 4002 of the House

bill, sec. 14218 of the Senate amendment, and sec. 956

of the Code) …………………………………………………………………… 600

3. Special rules relating to sales or transfers involving specified

10-percent owned foreign corporations (sec. 4003 of

the House bill, sec. 14102 of the Senate Amendment and

secs. 367(a)(3)(C), 961, 1248 and new sec. 91 of the Code) .. 601

4. Treatment of deferred foreign income upon transition to

participation exemption system of taxation and deemed

repatriation at two-tier rate (sec. 4004 of the House bill,

sec. 14103 of the Senate amendment, and secs. 78, 904,

907 and 965 of the Code) ……………………………………………….. 606

5. Election to increase percentage of domestic taxable income

offset by overall domestic loss treated as foreign source

(sec. 14305 of the Senate amendment and sec. 904(g) of

the Code) ………………………………………………………………………. 622

B. Rules Related to Passive and Mobile Income …………………………… 622

1. Deduction for foreign-derived intangible income and global

intangible low-taxed income (sec. 14202 of the Senate

amendment and new sec. 250 of the Code) ……………………… 622

2. Special rules for transfers of intangible property from controlled

foreign corporations to United States shareholders

(sec. 14203 of the Senate amendment and new sec. 966

of the Code) …………………………………………………………………… 627

C. Modifications Related to Foreign Tax Credit System ……………….. 628

1. Repeal of section 902 indirect foreign tax credits; determination

of section 960 credit on current year basis (sec. 4101

of the House bill, sec. 14301 of the Senate amendment,

and secs. 902 and 960 of the Code) …………………………………. 628

2. Source of income from sales of inventory determined solely

on basis of production activities (sec. 4102 of the House

bill, sec. 14304 of the Senate amendment, and sec. 863(b)

of the Code) …………………………………………………………………… 629

3. Separate foreign tax credit limitation basket for foreign

branch income (sec. 14302 of the Senate amendment and

sec. 904 of the Code) ……………………………………………………… 630

4. Acceleration of election to allocate interest, etc., on a worldwide

basis (sec. 14303 of the Senate amendment and sec.

864 of the Code) …………………………………………………………….. 630

D. Modification of Subpart F Provisions ………………………………………. 631

1. Repeal of inclusion based on withdrawal of previously excluded

subpart F income from qualified investment (sec.

4201 of the House bill, sec. 14213 of the Senate amendment,

and sec. 955 of the Code) ……………………………………… 631

2. Repeal of treatment of foreign base company oil related

income as subpart F income (sec. 4202 of the House bill,

sec. 14211 of the Senate amendment, and sec. 954(a) of

the Code) ………………………………………………………………………. 631

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INTERNATIONAL TAX PROVISIONS—Continued

3. Inflation adjustment of de minimis exception for foreign

base company income (sec. 4203 of the House bill, sec.

14212 of the Senate amendment, and sec. 954(b)(3) of the

Code) …………………………………………………………………………….. 632

4. Look-thru rule for related controlled foreign corporations

made permanent (sec. 4204 of the House bill, sec. 14217

of the Senate amendment, and sec. 954(c)(6) of the Code) .. 632

5. Modification of stock attribution rules for determining CFC

status (sec. 4205 of the House bill, sec. 14214 of the Senate

amendment, and secs. 318 and 958 of the Code) ……………… 633

6. Modification of definition of United States shareholder (sec.

14215 of the Senate amendment and sec. 951 of the Code) 634

7. Elimination of requirement that corporation must be controlled

for 30 days before subpart F inclusions apply (sec.

4206 of the House bill, sec. 14216 of the Senate amendment,

and sec. 951(a)(1) of the Code) ……………………………… 634

8. Current year inclusion of foreign high return amounts or

global intangible low-taxed income by United States shareholders

(sec. 4301 of the House bill, sec. 14201 of the

Senate amendment, and secs. 78 and 960 and new sec.

951A of the Code) ………………………………………………………….. 635

9. Limitation on deduction of interest by domestic corporations

which are members of an international group (sec. 4302

of the House bill, sec. 14221 of the Senate amendment,

and new sec. 163(n) of the Code) ……………………………………. 645

E. Prevention of Base Erosion …………………………………………………….. 649

1. Base erosion using deductible cross-border payments between

affiliated companies (sec. 4303 of the House bill

and new secs. 4491 and 6038E of the Code; sec. 14401

of the Senate amendment and secs. 6038A and 6038C

and new secs. 59A and 59B of the Code) …………………………. 649

2. Limitations on income shifting through intangible property

transfers (sec. 14222 of the bill and secs. 367, 482, and

936 of the Code) …………………………………………………………….. 661

3. Certain related party amounts paid or accrued in hybrid

transactions or with hybrid entities (sec. 14223 of the Senate

amendment and sec. 267A of the Code) …………………….. 662

4. Shareholders of surrogate foreign corporations not eligible

not eligible for reduced rate on dividends (sec. 14225 of

the Senate amendment and sec. 1 of the Code) ……………….. 664

F. Provisions Related to the Possessions of the United States ………. 664

1. Extension of deduction allowable with respect to income

attributable to domestic production activities in Puerto

Rico (sec. 4401 of the House bill and sec. 199 of the Code) . 664

2. Extension of temporary increase in limit on cover over of

rum excise taxes to Puerto Rico and the Virgin Islands

(sec. 4402 of the House bill and sec. 7652(f) of the Code) …. 666

3. Extension of American Samoa economic development credit

(sec. 4403 of the House bill and sec. 119 of Pub. L. No.

109–432) ……………………………………………………………………….. 667

G. Other International Reforms ………………………………………………….. 669

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INTERNATIONAL TAX PROVISIONS—Continued

1. Restriction on insurance business exception to the passive

foreign investment company rules (sec. 4501 of the House

bill, sec. 14502 of the Senate amendment, and sec. 1297

of the Code) …………………………………………………………………… 669

2. Repeal of fair market value of interest expense apportionment

(sec. 14503 of the Senate amendment and sec. 864

of the Code) …………………………………………………………………… 672

3. Modification to source rules involving possessions (sec.

14504 of the Senate amendment and sec. 865 of the Code) 672

TITLE II—JOINT EXPLANATORY STATEMENT ………………………………………. 675

CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND LIMITED

TARIFF BENEFITS ………………………………………………………………………………… 676

TAX COMPLEXITY ANALYSIS …………………………………………………………………. 676

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