American Business Competitiveness Act of 2015
This bill amends the Internal Revenue Code to:
[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4377 Introduced in House (IH)]
<DOC>
114th CONGRESS
2d Session
H. R. 4377
To amend the Internal Revenue Code of 1986 to tax business income on a
cash flow basis, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 13, 2016
Mr. Nunes (for himself, Mr. Tiberi, Mr. Boustany, Mr. Marchant, Mr.
Holding, Mr. Pittenger, Mr. Palmer, Mr. Russell, Mr. Simpson, Mr.
Franks of Arizona, Mr. Stewart, Mr. Calvert, Mr. Knight, Mrs. Mimi
Walters of California, Mr. Valadao, Mr. Issa, Mr. Amodei, Mr. Yoho, Mr.
Hardy, Mr. Cole, Mr. Pompeo, Mr. Roe of Tennessee, Mr. Fleischmann, Mr.
Emmer of Minnesota, Mr. Long, Mr. Brat, and Mr. Rouzer) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to tax business income on a
cash flow basis, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE, ETC.
(a) Short Title.--This Act may be cited as the ``American Business
Competitiveness Act of 2015''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act 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.
(c) Table of Contents.--The table of contents is as follows:
Sec. 1. Short title, etc.
Sec. 2. Congressional findings.
Sec. 3. Maximum tax rate for net business income.
Sec. 4. Definition of net business income tax base.
Sec. 5. Allowance of transition basis deduction.
Sec. 6. Interest income of individuals taxed in same manner as dividend
income; reduced by interest expense.
Sec. 7. Repeal of depreciation, international, and other tax
provisions.
Sec. 8. Expanded relief for net operating losses.
Sec. 9. Repeal of corporate AMT and individual AMT preferences and
adjustments that pertain to capital cost
recovery.
Sec. 10. Repeal of business tax credits.
Sec. 11. Disallowance of interest expense deduction, except qualified
residence interest.
Sec. 12. Cash method of accounting.
SEC. 2. CONGRESSIONAL FINDINGS.
(a) Findings Relating to the Depreciation System of Federal
Business Taxation.--Congress finds the depreciation system--
(1) is rife with outdated asset classifications, inaccurate
depreciation schedules, targeted credits and deductions, and
targeted expensing provisions;
(2) rewards some business activities over others;
(3) reduces savings and investment in the United States by
increasing the rate of return that is required for investments
to be viable; and
(4) creates complexity for both the Internal Revenue
Service and businesses.
(b) Findings Relating to the Deduction of Business Interest.--
Congress finds that the business interest deduction--
(1) encourages businesses to finance their operations with
debt;
(2) results in negative effective tax rates for some
investments; and
(3) heightens bankruptcy risk during periods of economic
distress.
(c) Findings Relating to the Expensing of Investment.--Congress
finds that allowing businesses to expense their investments--
(1) will make more investment opportunities profitable for
businesses to undertake;
(2) will promote investment in the United States;
(3) will limit the Government's ability to reward specific
business activities through the tax code; and
(4) will simplify business taxation.
SEC. 3. MAXIMUM TAX RATE FOR NET BUSINESS INCOME.
(a) Individual Net Business Income.--
(1) Maximum rate of 25 percent.--Paragraph (1) of section
1(h) is amended--
(A) in subparagraph (A)--
(i) by striking ``the net capital gain'' in
clause (i) and inserting ``the sum of the net
capital gain and the net business income''; and
(ii) by striking ``the adjusted net capital
gain'' in clause (ii)(II) and inserting ``the
sum of the adjusted net capital gain and the
net business income''; and
(B) in subparagraph (E)(i) by striking
``unrecaptured section 1250 gain'' and inserting ``25-
percent rate gain''.
(2) 25-percent rate gain.--Subsection (h) of section 1 is
amended by adding at the end the following:
``(12) 25-percent rate gain.--For purposes of this
subsection--
``(A) unrecaptured section 1250 gain, plus
``(B) net business income.''.
(b) Corporate Income Tax Rate Reduction; Tax Imposed Only on
Corporation's Net Business Income.--
(1) In general.--Section 11 is amended to read as follows:
``SEC. 11. TAX IMPOSED.
``(a) Corporations in General.--A tax is hereby imposed for each
taxable year on the net business income of every corporation.
``(b) Amount of Tax.--The amount of the tax imposed by subsection
(a) shall be the sum of--
``(1) 15 percent of so much of the net business income as
does not exceed $50,000, and
``(2) 25 percent of so much of the net business income as
exceeds $50,000.
In the case of a corporation which has net business income in excess of
$100,000 for any taxable year, the amount of tax determined under the
preceding sentence for such taxable year shall be increased by the
lesser of (i) 5 percent of such excess, or (ii) $5,000.''.
(2) Conforming amendment.--Paragraphs (1) and (2) of
section 1445(e) are each amended by striking ``35 percent'' and
inserting ``25 percent''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning on or after January 1, 2015.
SEC. 4. DEFINITION OF NET BUSINESS INCOME TAX BASE.
(a) In General.--Subtitle A is amended by inserting after chapter
2A the following new chapter:
``CHAPTER 2B--BUSINESS INCOME
``subchapter a. basic rules
``subchapter b. capital contributions, mergers, acquisitions, and
distributions
``subchapter c. international provisions
``subchapter d. financial institutions
``subchapter e. other definitions
``Subchapter A--Basic Rules
``Sec. 1421. Net business income.
``SEC. 1421. NET BUSINESS INCOME.
``(a) In General.--For purposes of this title, the term `net
business income' means, for a taxable year with respect to a business
entity, the amount by which the taxable receipts of the business entity
for the taxable year exceed the deductible amounts for the business
entity for the taxable year.
``(b) Taxable Receipts.--
``(1) In general.--The term `taxable receipts' means all
receipts from the sale of property, use of property, and
performance of services.
``(2) Games of chance.--Amounts received for playing games
of chance by business entities engaging in the activity of
providing such games shall be treated as receipts from the sale
of property or services.
``(3) In-kind receipts.--The taxable receipts attributable
to the receipt of property, use of property or services in
whole or partial exchange for property, use of property or
services equal the fair market value of the services or
property received.
``(4) Taxes.--The term `taxable receipts' does not include
any excise tax, sales tax, custom duty, or other separately
stated levy imposed by a Federal, State, or local government
received by a business entity in connection with the sale of
property or services or the use of property.
``(5) Financial receipts.--
``(A) In general.--The term `taxable receipts' does
not include financial receipts.
``(B) Financial receipts.--The term `financial
receipts' includes--
``(i) interest,
``(ii) dividends and other distributions by
a business entity,
``(iii) proceeds from the sale of stock,
other ownership interests in business entities,
or other financial instruments,
``(iv) proceeds from life insurance
policies,
``(v) proceeds from annuities,
``(vi) proceeds from currency hedging or
exchanges, and
``(vii) proceeds from other financial
transactions.
``(C) Financial instrument.--The term `financial
instrument' means any--
``(i) share of stock in a corporation,
``(ii) equity ownership in any widely held
or publicly traded partnership, trust, or other
business entity,
``(iii) note, bond, debenture, or other
evidence of indebtedness,
``(iv) interest rate, currency, or equity
notional principal contract,
``(v) evidence or interest in, or a
derivative financial instrument in, any
financial instrument described in clause (i),
(ii), (iii), or (iv), or any currency,
including any option, forward contract, short
position, and any similar financial instrument
in such a financial instrument or currency, and
``(vi) a position which--
``(I) is not a financial instrument
described in clause (i), (ii), (iii),
or (iv),
``(II) is a hedge with respect to
such a financial instrument, and
``(III) is clearly identified in
the dealer's records as being described
in this subparagraph before the close
of the day on which it was acquired or
entered into.
``(c) Deductible Amounts.--
``(1) In general.--The term `deductible amounts' includes
for a taxable year with respect to a business entity--
``(A) the cost of business purchases in the taxable
year (as determined under subsection (d)),
``(B) compensation expenses for an individual
(other than amounts paid to an individual in his
capacity as a business entity), or
``(C) the cost of employer-provided health
insurance for which the employee, members of his
family, or persons designated by him or members of his
family are the beneficiaries,
``(D) such entity's loss carryover deduction
(determined under section 172),
``(E) in the case of an entity which is a real
estate investment trust, the amount of any dividend
payment made to a shareholder of such trust, and
``(F) the transition basis deduction (as determined
under section 5 of the American Business
Competitiveness Act of 2015).
``(2) Compensation expenses.--For purposes of subsection
(a), the term `compensation expenses' means--
``(A) wages, salaries or other cash payable for
services,
``(B) any taxes imposed on the recipient that are
withheld by the business entity,
``(C) the cost of property purchased to provide
employees with compensation (other than property
incidental to the provision of fringe benefits that are
excluded from income under the individual tax), and
``(D) the cost of fringe benefits other than health
insurance deductible under paragraph (1)(C).
``(3) Pass-thru wages must be reasonable.--For purposes of
paragraph (2)(A), amounts payable as wages, salaries or other
cash payable for services by a S corporation, partnership, or
other pass-thru entity shall not be treated as wages, salaries
or other cash payable for services unless such amounts are
reasonable for the service rendered.
``(d) Cost of Business Purchases.--
``(1) Business purchases.--
``(A) In general.--The term `business purchases'
means the acquisition of--
``(i) property,
``(ii) the use of property, or
``(iii) services,
for use in a business activity.
``(B) Examples.--Business purchases include
(without limitation) the--
``(i) purchase or rental of real property,
``(ii) purchase or rental of capital
equipment,
``(iii) purchase of supplies and inventory,
``(iv) purchase of services from
independent contractors, and
``(v) imports for use in a business
activity.
``(C) Exclusions.--Business purchases do not
include--
``(i) payments for use of money or capital,
such as interest or dividends (except to the
extent that a portion so paid is a fee for
financial intermediation services),
``(ii) premiums for life insurance,
``(iii) the acquisition of savings assets
or other financial instruments (as defined in
subsection (b)(5)(C)),
``(iv) taxes (except as provided in
subsection (b)(2) relating to product taxes),
and
``(v) the cost of financial instruments (as
defined in subsection (b)(5)(C)).
``(2) Cost of business purchases.--
``(A) In general.--The term `cost of a business
purchase' is the amount paid or to be paid for the
business purchase.
``(B) Property and services acquired for
property.--If a business entity receives property or
services from a business entity in whole or partial
exchange for property or services, the property or
services acquired shall be treated as if they were
purchased for an amount equal to the fair market value
of the services or property received. For purposes of
this section, property includes stock and other equity
interests in business other than stock or an equity
interest in the business entity acquiring the property
or services. See section 1422 for rules on property or
services received in exchange for an equity interest in
the recipient.
``(C) Gambling payments.--In the case of a business
involving gambling, lotteries, or other games of
chance, business purchases include amounts paid to
winners.
``(e) Business Entity and Business Activity.--
``(1) Business entity.--For purposes of determining
business income, the term `business entity' means any
corporation (including any S corporation), unincorporated
association, partnership, limited liability company,
proprietorship, independent contractor, individual, or any
other person, engaging in business activity in the United
States. An individual shall be considered a business entity
only with respect to the individual's business activities.
``(2) Business activity.--The term `business activity'
means the sale of property or services, the leasing of
property, the development of property or services for
subsequent sale or use in producing property or services for
subsequent sale. The term `business activity' does not include
casual or occasional sales of property used by an individual
(other than in a business activity), such as the sale by an
individual of a vehicle used by the individual.
``(3) Exception for certain employees.--
``(A) In general.--The term `business activity'
does not include--
``(i) the performance of services by an
employee for an employer that is a business
entity with respect to the activity in which
the employee is engaged, or
``(ii) the performance of regular domestic
household services (including babysitting,
housecleaning, and lawn cutting) by an employee
of an employer that is an individual or family.
``(B) Employee defined.--For purposes of this
subsection, the term `employee' includes an individual
partner who provides services to a partnership or an
individual member who provides services to a limited
liability company, or a proprietor with respect to
compensation for services from his proprietorship.
``(f) Savings Assets.--The term `savings assets' means stocks,
bonds, securities, certificates of deposits, investments in
partnerships and limited liability companies, shares of mutual funds,
life insurance policies, annuities, and other similar savings or
investment assets.
``Subchapter B--Capital Contributions, Mergers, Acquisitions, and
Distributions
``Sec. 1422. Contributions to a business entity.
``Sec. 1422A. Distributions of property.
``Sec. 1422B. Asset acquisitions.
``Sec. 1422C. Mergers, stock acquisitions, and spin-offs, split-offs,
etc.
``SEC. 1422. CONTRIBUTIONS TO A BUSINESS ENTITY.
``(a) By Business Entity.--
``(1) Cash.--If a business entity contributes cash to a
business entity of which it is or becomes a partial or full
owner, the amount contributed is not a deductible amount to the
contributor or a taxable receipt to the recipient.
``(2) Property or services.--If a business entity
contributes property or services to a business entity of which
it is or becomes a partial or full owner, the transaction will
not result in taxable receipts to the contributor or a
deduction for a business purchase for the recipient and will
not constitute a sale resulting in taxable receipts to the
contributor.
``(b) By Individual.--
``(1) Cash.--If an individual contributes cash to a
business entity, the amount contributed is not a deductible
amount to the contributor and the cash received by the business
entity is not a taxable receipt.
``(2) New property.--If an individual contributes to a
business entity property that the individual purchased for the
business entity but which was not used by any person after its
purchase, the property shall be considered purchased by such
business entity from the person from which the individual
purchased the property and the transaction will not result in a
deductible amount to the contributor.
``(3) Personal use property.--
``(A) In general.--If an individual contributes
personal use property to a business entity in which the
individual has an ownership interest or for which the
individual receives an ownership interest, the business
entity shall not be permitted to deduct the value of
the property received as a business expense. The
business entity will have a tax basis in the
contributed property equal to the contributor's basis.
``(B) Personal use property.--The term `personal
use property' means any property used by an individual
at any time other than in a business activity.
``(4) Services.--If an individual contributes services to a
business entity in which the individual has an ownership
interest or receives an ownership interest, the business entity
shall not be permitted to deduct the value of the services
received (or the value of the equity interest provided to the
services provider).
``SEC. 1422A. DISTRIBUTIONS OF PROPERTY.
``(a) Distributions Other Than to Controlling Business.--If a
business entity distributes all or a portion of its assets to its
owners (other than a controlling business entity), the business entity
will be treated as if it sold the assets to its owners at fair market
value. The fair market value will be determined by the distributing
business entity and those determinations, unless unreasonable, will be
binding on the recipients.
``(b) Distributions to a Controlling Business.--If a business
entity distributes all or a portion of its assets to a controlling
business entity, the controlling business entity will assume the
distributing entity's tax attributes with respect to the assets and
neither entity will have taxable receipts or a deduction as a result of
the transaction.
``(c) Distribution of Personal Use Property.--If personal use
property is distributed to the individual who contributed the personal
use property to a business entity, the fair market value of the
property for purposes of subsection (a) shall equal the basis of the
property plus any enhancement in value of the property attributable to
business purchases with respect to the property.
``(d) Controlling Business Entity.--A business entity is a
`controlling business entity' with respect to another business entity
if it, or any person to which it is related, owns directly or
indirectly more than 50 percent of the profits or capital interest in
the other business entity. For purposes of the preceding sentence, a
person is related to a business entity if such person owns directly or
indirectly more than 50 percent of the profits or capital interest in
the business entity.
``(e) Application of This Section.--This section applies to both
liquidating and nonliquidating distributions.
``SEC. 1422B. ASSET ACQUISITIONS.
``(a) In General.--If a business entity transfers some or all of
its assets, the consideration received for such assets shall be
allocated among the assets transferred in the same manner as was
required by section 1060 of the Internal Revenue Code of 1986. If the
transferee and transferor agree in writing on the allocation of any
consideration, or as to the fair market value of any of the assets,
such agreement shall be binding on both the transferor and transferee
unless the Secretary determines that such allocation (or fair market
value) is not appropriate.
``(b) Tax Consequences.--The tax consequences of an asset
acquisition shall be determined in accordance with the rules of this
chapter and shall be dependent upon allocations made under subsection
(a). In general, consideration allocable to savings assets, such as
stock in another business entity, would not be included in taxable
receipts of the transferor and would not be a business purchase of the
purchaser, but consideration allocable to the sale of tangible property
and intangible property (other than savings assets) will constitute
taxable receipts of the seller and a business purchase of the
purchaser.
``(c) Election To Treat Asset Acquisition as a Stock Acquisition.--
In the case of the sale of substantially all of the assets of a
business entity or substantially all of the assets of a line of
business or a separately standing business of a business entity, the
transferee and transferor can jointly elect to treat the acquisition as
if it were an acquisition of the stock of a business entity holding the
assets so transferred. In such case, the rules of section 1422C shall
apply.
``(d) Authority To Require Allocation Agreement and Notice to the
Secretary.--If the Secretary determines that certain types of asset
acquisitions have significant possibilities of tax avoidance, the
Secretary may require--
``(1) parties to such types of acquisitions to enter into
agreements allocating consideration,
``(2) parties to acquisitions involving certain kinds of
assets to enter into agreements allocating part of the
consideration to those assets, or
``(3) parties to certain acquisitions to report information
to the Secretary.
``(e) Asset Acquisition Rules Do Not Apply if Consideration
Includes Equity in Purchaser.--
``(1) In general.--If a business entity issues its own
equity or equity in a subsidiary or other controlled entity as
part of the consideration for the transfer of assets to it, the
transaction shall be treated as a business purchase and not as
an asset acquisition, and the taxpayer shall not be entitled to
a loss carryover for any unused deduction attributable to the
equity portion of such transfer.
``(2) Equity.--For purposes of this subsection, equity
means--
``(A) stock, in the case of a corporation,
``(B) partnership or similar interest, in the case
of a partnership or limited liability company, and
``(C) an ownership interest or interest in profits
in the case of any other business entity.
``SEC. 1422C. MERGERS, STOCK ACQUISITIONS, AND SPIN-OFFS, SPLIT-OFFS,
ETC.
``(a) Mergers.--A merger of one business entity into another or two
businesses entities into a third business entity or any other similar
transaction shall have no direct consequences under the business cash
flow tax. The surviving entity shall assume the tax attributes of the
merged business entities, including any loss carryovers and credit
carryovers.
``(b) Stock Acquisition.--The acquisition of all or substantially
all of the ownership interest in one business entity either for cash or
in exchange for ownership in the acquiring entity or an entity
controlled by the acquired entity shall have no direct consequences
under the business cash flow tax.
``(c) Spin-Offs, Split-Offs, Etc.--A spin-off, split-off or split-
up of a business entity shall have no direct tax consequences under
this chapter.
``Subchapter C--International Provisions
``Sec. 1423. No tax imposed on income derived from trade or business
outside the United States.
``Sec. 1423A. No credit allowed for foreign taxes on income derived
from trade or business outside the United
States.
``Sec. 1423B. 5-percent toll charge on undistributed foreign earnings.
``SEC. 1423. NO TAX IMPOSED ON INCOME DERIVED FROM TRADE OR BUSINESS
OUTSIDE THE UNITED STATES.
``(a) In General.--Only taxable receipts and deductible amounts
which are effectively connected with the conduct of a trade or business
within the United States shall be included or deducted in the
computation of net business income.
``(b) No tax shall be imposed under this title on income
effectively connected with the conduct of a trade or business that is
not a trade or business within the United States.
``SEC. 1423A. NO CREDIT ALLOWED FOR FOREIGN TAXES ON INCOME DERIVED
FROM TRADE OR BUSINESS OUTSIDE THE UNITED STATES.
``(a) In General.--No credit shall be allowed under this title for
any income, war profits, or excess profits taxes paid or accrued with
respect to income effectively connected with the conduct of a trade or
business that is not a trade or business within the United States.
``(b) Unused Foreign Tax Credits.--Under regulations prescribed by
the Secretary, any taxpayer that is a corporation may elect to treat
foreign tax credit carryovers from taxable years beginning prior to
January 1, 2015, as general business credit carryovers.
``SEC. 1423B. 5-PERCENT TOLL CHARGE ON UNDISTRIBUTED FOREIGN EARNINGS.
``There is hereby imposed on any domestic corporation which owns 10
percent or more of the voting stock of a foreign corporation a tax
equal to 5 percent of the corporation's post-1986 undistributed
earnings for the corporation's last taxable year beginning prior to
January 1, 2015. For purposes of this subsection, post-1986
undistributed earnings shall be computed as provided in section
902(c)(1) of the Internal Revenue Code of 1986 (as in effect prior to
the enactment of the American Business Competitiveness Act of 2015),
except that such undistributed earnings shall be diminished by the
dividends distributed during such taxable year. Except as provided in
regulations prescribed by the Secretary, the tax imposed by this
subsection shall be paid at the same time and in the same manner as the
tax imposed by section 11 for the corporation's first taxable year
beginning on or after January 1, 2015.
``Subchapter D--Financial Institutions
``Sec. 1424. Real-plus-financial treatment of certain transactions
involving financial institutions.
``SEC. 1424. REAL-PLUS-FINANCIAL TREATMENT OF CERTAIN TRANSACTIONS
INVOLVING FINANCIAL INSTITUTIONS.
``(a) Taxation of Transactions Between Financial Institutions and
Businesses.--
``(1) General rule.--In the case of a taxpayer that is a
financial institution, taxable receipts shall include all
amounts received in covered financial transactions and
deductible amounts and shall include all amounts paid in
covered financial transactions.
``(2) Financial institutions.--For purposes of this
section, `financial institution' shall mean, under regulations
prescribed by the Secretary, any business entity that is
regulated by any Federal or State agency as a financial
institution. Such term includes regulated banks, insurance
companies, investment banks, securities brokers, and mutual
funds. Such term does not include credit unions.
``(3) Covered financial transactions.--For purposes of this
section, `covered financial transactions' shall mean
transactions between a financial institution and a party that
is not a business entity as defined in section 1421(e)(1).
Under regulations prescribed by the Secretary, transactions
that do not involve any significant provision of financial
services (other than services for which explicit fees are
charged) shall be treated as not being covered financial
transactions.
``(b) Transition Rule.--Under regulations prescribed by the
Secretary, a tax is imposed on any financial institution equal to 25
percent of the institution's net claims against parties that are not
business entities, as defined in section 1421(e)(1). Such claims shall
be valued at the end of the financial institution's last taxable year
beginning before January 1, 2015, with value measured by the
institution's basis in such claims. Except as provided in regulations
prescribed by the Secretary, the tax imposed by this subsection shall
be paid at the same time and in the same manner as the net business
income tax for the financial institution's first taxable year beginning
on or after January 1, 2015.
``Subchapter E--Other Definitions
``Sec. 1425. Other definitions.
``SEC. 1425. OTHER DEFINITIONS.
``(a) In General.--When used in this chapter, where not otherwise
distinctly expressed or manifestly incompatible with the intent
thereof--
``(1) United states.--The term `United States' includes the
States and the District of Columbia.
``(2) Treatment of possessions.--
``(A) In general.--For purposes of this chapter,
the United States possessions shall not be treated as
part of the United States.
``(B) Possession.--For purposes of paragraph (1),
`United States possession' or `possession' means a
possession of the United States and includes the
Commonwealth of Puerto Rico, the Commonwealth of the
Northern Marianas Islands, Guam, American Samoa, and
the United States Virgin Islands.
``(3) Definitions generally.--Any definition included in
this chapter shall apply for all purposes of this chapter
unless--
``(A) such definition is limited to the purposes of
a particular chapter, section, or subsection, or
``(B) the definition clearly would not be
applicable in a particular context.
``(b) Interpretations Consistent With Rest of Internal Revenue Code
of 1986.--Terms not defined in this chapter, but defined elsewhere in
this title, shall be interpreted in a manner consistent with this
title, except to the extent such interpretation would be inconsistent
with the principles and purposes of this chapter.''.
(b) Exempt Organizations and Unrelated Business Income.--Sections
512 and 514 are both amended by striking ``gross income'' each place it
appears and inserting ``net business income''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning on or after January 1, 2015, except to
the extent otherwise specifically provided in the text of such
amendments.
SEC. 5. ALLOWANCE OF TRANSITION BASIS DEDUCTION.
In the case of any property held by the taxpayer on December 31,
2014, and used in a trade or business of the taxpayer on such date, the
following rules shall apply:
(1) Basis.--The basis of such property shall be zero.
(2) Deduction.--
(A) In general.--There shall be allowed to the
taxpayer a deduction with respect to such property,
other than land.
(B) Amount of deduction.--Except as provided in
subparagraph (D), such deduction shall be determined
for a taxable year by amortizing the basis of such
property on the same schedule and method that applied
to such property before the enactment of this Act.
(C) Disposal of property.--Subparagraph (A) shall
apply with respect to property held by the taxpayer on
December 31, 2014, whether or not the taxpayer disposes
of such property after December 31, 2014.
(D) Inventory.--In the case of inventory, the
deduction allowed by subparagraph (A) shall be allowed
in the taxable year of the taxpayer which includes
January 1, 2015.
SEC. 6. INTEREST INCOME OF INDIVIDUALS TAXED IN SAME MANNER AS DIVIDEND
INCOME; REDUCED BY INTEREST EXPENSE.
(a) In General.--Subparagraph (A) of section 1(h)(11) is amended by
striking ``qualified dividend income'' and inserting ``the sum of
qualified dividend income and qualified interest income and reduced by
interest expense''.
(b) Qualified Interest Income.--Paragraph (11) of section 1(h) is
amended by adding at the end the following:
``(E) Qualified interest income.--For purposes of
this paragraph, the term `qualified interest income'
means--
``(i) interest on deposits with a bank (as
defined in section 581),
``(ii) amounts (whether or not designated
as interest) paid, in respect of deposits,
investment certificates, or withdrawable or
repurchasable shares, by--
``(I) a mutual savings bank,
cooperative bank, domestic building and
loan association, industrial loan
association or bank, or credit union,
or
``(II) any other savings or thrift
institution which is chartered and
supervised under Federal or State law,
the deposits or accounts in which are
insured under Federal or State law or
which are protected and guaranteed
under State law,
``(iii) interest on--
``(I) evidences of indebtedness
(including bonds, debentures, notes,
and certificates) issued by a domestic
corporation in registered form, and
``(II) to the extent provided in
regulations prescribed by the
Secretary, other evidences of
indebtedness issued by a domestic
corporation of a type offered by
corporations to the public,
``(iv) interest on obligations of the
United States, a State, or a political
subdivision of a State (not excluded from gross
income of the taxpayer under any other
provision of law), and
``(v) interest attributable to
participation shares in a trust established and
maintained by a corporation established
pursuant to Federal law.''.
(c) Interest Expense.--Paragraph (11) of section 1(h), as amended
by subsection (b), is amended by inserting at the end the following:
``(F) Interest expense.--The term `interest
expense' means interest paid by the taxpayer other than
qualified residence interest.''.
(d) Conforming Amendment.--The heading for section 1(h)(11) is
amended by inserting ``and interest'' after ``dividends''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2014.
SEC. 7. REPEAL OF DEPRECIATION, INTERNATIONAL, AND OTHER TAX
PROVISIONS.
(a) Depreciation and Cost Recovery Provisions.--The following
sections of the Internal Revenue Code of 1986 are hereby repealed:
(1) Section 167 (relating to depreciation).
(2) Section 168 (relating to accelerated cost recovery
system).
(3) Section 169 (relating to amortization of pollution
control facilities).
(4) Section 173 (relating to circulation expenditures).
(5) Section 174 (relating to research and experimental
expenditures).
(6) Section 175 (relating to soil and water conservation
expenditures; endangered species recovery expenditures).
(7) Section 176 (relating to payments with respect to
employees of certain foreign corporations).
(8) Section 178 (relating to amortization of cost of
acquiring a lease).
(9) Section 179 (relating to election to expense certain
depreciable business assets).
(10) Section 179A (relating to deduction for clean-fuel
vehicles and certain refueling property).
(11) Section 179B (relating to deduction for capital costs
incurred in complying with Environmental Protection Agency
sulfur regulations).
(12) Section 179C (relating to election to expense certain
refineries).
(13) Section 179D (relating to energy efficient commercial
buildings deduction).
(14) Section 179E (relating to election to expense advanced
mine safety equipment).
(15) Section 180 (relating to expenditures by farmers for
fertilizer, etc.).
(16) Section 181 (relating to treatment of certain
qualified film and television productions).
(17) Section 190 (relating to expenditures to remove
architectural and transportation barriers to the handicapped
and elderly).
(18) Section 192 (relating to contributions to black lung
benefit trust).
(19) Section 193 (relating to tertiary injectants).
(20) Section 194 (relating to treatment of reforestation
expenditures).
(21) Section 195 (relating to start-up expenditures).
(22) Section 196 (relating to deduction for certain unused
business credits).
(23) Section 197 (relating to amortization of goodwill and
certain other intangibles).
(24) Section 198 (relating to expensing of environmental
remediation costs).
(25) Section 198A (relating to expensing of qualified
disaster expenses).
(26) Section 199 (relating to income attributable to
domestic production activities).
(27) Section 263 (relating to capital expenditures).
(28) Section 263A (relating to capitalization and inclusion
in inventory costs of certain expenses).
(29) Section 471 (relating to general rule for
inventories).
(30) Section 472 (relating to last-in, first-out
inventories).
(31) Section 473 (relating to qualified liquidations of
LIFO inventories).
(32) Section 474 (relating to simplified dollar-value LIFO
method for certain small businesses).
(33) Section 611 (relating to allowance of deduction for
depletion).
(34) Section 612 (relating to basis for cost depletion).
(35) Section 613 (relating to percentage depletion).
(36) Section 613A (relating to limitations on percentage
depletion in case of oil and gas wells).
(37) Section 614 (relating to definition of property).
(38) Section 616 (relating to development expenditures).
(39) Section 617 (relating to deduction and recapture of
certain mining exploration expenditures).
(b) Special Deductions for Corporations.--The following sections of
the Internal Revenue Code of 1986 are hereby repealed:
(1) Section 241 (relating to allowance of special
deductions).
(2) Section 243 (relating to dividends received by
corporations).
(3) Section 244 (relating to dividends received on certain
preferred stock).
(4) Section 245 (relating to dividends received from
certain foreign corporations).
(5) Section 246 (relating to rules applying to deductions
for dividends received).
(6) Section 246A (relating to dividends received deduction
reduced where portfolio stock is debt financed).
(7) Section 247 (relating to dividends paid on certain
preferred stock of public utilities).
(8) Section 248 (relating to organizational expenditures).
(9) Section 249 (relating to limitation on deduction of
bond premium on repurchase).
(c) Recognition of Revenue and Timing of Deduction Provisions.--The
following provisions of the Internal Revenue Code of 1986 are hereby
repealed:
(1) Part X of subchapter B of chapter 1 of the Internal
Revenue Code of 1986 (relating to terminal railroad
corporations and their shareholders).
(2) Section 456 (relating to prepaid dues income of certain
membership organizations).
(3) Section 458 (relating to magazines, paperbacks, and
records returned after the close of the taxable year).
(4) Section 460 (relating to special rules for long-term
contracts).
(5) Section 467 (relating to certain payments for the use
of property or services).
(6) Section 468 (relating to special rules for mining and
solid waste reclamation and closing costs).
(d) International Provisions.--The following provisions of the
Internal Revenue Code of 1986 are hereby repealed:
(1) Section 902 (relating to deemed paid credit where
domestic corporation owns 10 percent or more of voting stock of
foreign corporation).
(2) Section 907 (relating to special rules in case of
foreign oil and gas income).
(3) Subpart F of part III of subchapter N of chapter 1
(relating to controlled foreign corporations) other than
section 965.
(4) Subpart G of part III of subchapter N of chapter 1
(relating to export trade corporations).
(5) Part IV of part III of subchapter N of chapter 1
(relating to domestic international sales corporations).
(e) Effective Date.--
(1) Subsection (a).--The amendments made by subsection (a)
shall apply to property placed in service after December 31,
2014, in taxable years ending after that date.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply with respect to dividends received or accrued after
December 31, 2014, in taxable years ending after such date.
(3) Subsections (c) and (d).--The amendments made by
subsections (c) and (d) shall apply to taxable years beginning
on or after January 1, 2015.
SEC. 8. EXPANDED RELIEF FOR NET OPERATING LOSSES.
(a) Extended Carryback; Unlimited Carryforward With Interest.--
Paragraph (1) of section 172(b) is amended to read as follows:
``(1) Years to which loss may be carried.--
``(A) In general.--A net operating loss for any
taxable year--
``(i) shall be a net operating loss
carryback to each of the 5 taxable years
preceding the taxable year of such loss, and
``(ii) shall be a net operating loss
carryover to the succeeding taxable year and
added to the deduction allowable under
subsection (a) for such taxable year.
``(B) Limitation.--A net operating loss may not be
carried back to any taxable year ending before January
1, 2015, except that a loss arising in a taxable year
beginning in calendar year 2015 or calendar year 2016
may be carried back to the two preceding taxable
years.''.
(b) Interest on Carryforward.--Section 172(b) is amended by adding
at the end the following new paragraph:
``(4) Interest on carryforward.--The amount of any net
operating loss carryover shall, prior to being carried to a
succeeding taxable year, be increased by an amount equal to
such carryover multiplied by the Federal short-term rate (as
defined in section 1274(d)) for the month in which or with
which the taxable year ends.''.
(c) Conforming Amendments.--
(1) Section 172(d)(1) is amended by inserting ``(other than
by reason of subsection (b)(1)(B))'' after ``deduction''.
(2) Section 172 is amended by striking subsections (f),
(i), and (j) and redesignating subsections (g), (h), and (k) as
subsections (f), (g), and (h), respectively.
(d) Effective Date.--The amendments made by this section shall
apply to net operating losses arising in taxable years beginning after
December 31, 2014.
SEC. 9. REPEAL OF CORPORATE AMT AND INDIVIDUAL AMT PREFERENCES AND
ADJUSTMENTS THAT PERTAIN TO CAPITAL COST RECOVERY.
(a) Corporate AMT.--Section 55(a)(1)(B) is amended by adding at the
end the following flush sentence:
``For purposes of this title, the tentative minimum tax
of any corporation for any taxable year ending after
December 31, 2014, shall be zero.''.
(b) Individual AMT.--
(1) Section 56 is amended--
(A) by striking paragraphs (1), (2), (3), (5), and
(6) of subsection (a); and
(B) by striking subsection (b)(2).
(2) Section 57 is amended--
(A) by striking paragraphs (1), (2), (6), and (7)
of subsection (a); and
(B) by striking subsection (b).
(c) Effective Date.--
(1) Corporate amt.--The amendments made by subsection (a)
shall apply to taxable years ending after December 31, 2014.
(2) Individual amt.--The amendments made by subsection (b)
shall apply to amounts paid or incurred after December 31,
2014.
SEC. 10. REPEAL OF BUSINESS TAX CREDITS.
(a) In General.--Subparts D and E of part IV of subchapter A of
chapter 1 are hereby repealed.
(b) Special Rule for Carryback and Carryforward of Unused
Credits.--Any carryback or carryforward that arose under section 39 of
the Internal Revenue Code of 1986 (as in effect before the repeal of
such section by subsection (a)) shall be allowed under section 38 of
such Code (as in effect before the repeal of such section by subsection
(a)), in accordance with the terms of such sections (as so in effect).
(c) Effective Date.--The repeals made by this section shall apply
with respect to amounts paid or incurred, and property placed in
service, in taxable years beginning after December 31, 2014.
SEC. 11. DISALLOWANCE OF INTEREST EXPENSE DEDUCTION, EXCEPT QUALIFIED
RESIDENCE INTEREST.
(a) In General.--Section 163 is amended by adding at the end the
following:
(1) in subsection (a) by striking ``There'' and inserting
``Except as provided by subsection (n), there'',
(2) by redesignating subsection (n) as subsection (o), and
(3) by inserting after subsection (m) the following new
subsection:
``(n) Termination.--
``(1) In general.--Except as provided by subsection
(h)(2)(D) and paragraph (2), this section shall not apply to
interest paid or accrued after December 31, 2014.
``(2) Transition interest deduction.--
``(A) In general.--In the case of a taxpayer who is
a corporation, there shall be allowed as a deduction
for a taxable year the sum of the monthly transition
interest deductions for the taxable year.
``(B) Monthly transition interest deduction.--For
purposes of subparagraph (A)--
``(i) In general.--The monthly transition
interest deduction for any month is the
transition interest amount multiplied by the
applicable percentage for such month.
``(ii) Applicable percentage defined.--The
term `applicable percentage' means, with
respect to a month, 100 percent reduced (but
not below zero) by .833 for each month of the
transition period occurring before the month
for which such percentage is determined.
``(iii) Transition interest amount.--The
transition interest amount is the deduction
allowed to the taxpayer under this section for
the last full taxable year ending before
January 1, 2015.
``(iv) Transition period.--The term
`transition period' means the 120-month period
beginning with January 2015.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to interest paid or accrued on or after January 1, 2015.
SEC. 12. CASH METHOD OF ACCOUNTING.
(a) In General.--Subsection (a) of section 446 is amended to read
as follows:
``(a) General Rule.--Taxable income shall be computed under the
cash receipts and disbursements method of accounting.''.
(b) Conforming Amendments.--
(1) Section 446 is amended by striking subsections (b),
(c), and (e).
(2) The following sections of the Internal Revenue Code of
1986 are repealed:
(A) Section 447 (relating to method of accounting
for corporations engaged in farming).
(B) Section 448 (relating to limitation on use of
cash method of accounting).
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2014.
(2) Change in method of accounting.--In the case of any
taxpayer required by an amendment made by this section to
change its method of accounting for its first taxable year
beginning after the date of the enactment of this Act--
(A) such change shall be treated as initiated by
the taxpayer;
(B) such change shall be treated as made with the
consent of the Secretary of the Treasury; and
(C) the net amount of the adjustments required to
be taken into account by the taxpayer under section 481
of the Internal Revenue Code of 1986 shall be taken
into account ratably over a period (not greater than 8
taxable years) beginning with such first taxable year.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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