S.Amdt. 1773

SA 1773. Mrs. MURRAY (for herself and Mr. Udall) submitted an
amendment intended to be proposed by her to the bill H.R. 1, to provide
for reconciliation pursuant to titles II and V of the concurrent
resolution on the budget for fiscal year 2018; which was ordered to lie
on the table; as follows:

Beginning on page 120, strike line 7 and all that follows
through page 138, line 15 and insert the following:
(c) 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, 2020.
(2) Withholding.--The amendments made by subsection (b)(3)
shall apply to distributions made after December 31, 2020.
(3) Certain transfers.--The amendments made by subsection
(b)(6) shall apply to transfers made after December 31, 2020.
(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
determined under the Internal Revenue Code of 1986 as in
effect on the day before the date of the enactment of this
Act, 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, if 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
(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, 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.

SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS TO
REFLECT LOWER CORPORATE INCOME TAX RATES.

(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--
(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.--
(1) In general.--The amendments made by this section (other
than subsection (c) thereof) shall apply to dividends
received by a corporation after December 31, 2020, in taxable
years ending after such date.
(2) Limitation.--The amendments made by section 102(c)
shall apply to taxable years beginning after December 31,
2020.

Subpart B--Dividends Paid Deduction for Domestic Corporations

SEC. 13011. DIVIDENDS PAID DEDUCTION.

(a) General Rule.--Part VIII of subchapter B of chapter 1
is amended by inserting after section 241 the following:

``Subpart B--Dividends Paid Deduction

``Sec. 242. Dividends paid deduction.

``SEC. 242. DIVIDENDS PAID DEDUCTION.

``(a) Allowance of Deduction.--In the case of an eligible
corporation, there shall be allowed as a deduction an amount
equal to zero percent of the aggregate amount of applicable
dividends paid by the corporation during the taxable year.
``(b) Applicable Dividend.--For purposes of this section--
``(1) In general.--The term `applicable dividend' means,
with respect to an eligible corporation, any distribution by
the eligible corporation during a taxable year which is--
``(A) treated as a dividend for purposes of this chapter,
and
``(B) paid out of its applicable earnings and profits.
``(2) Ordering rule for dividend payments.--For purposes of
paragraph (1)(B), dividends shall be treated as paid--
``(A) first, out of exempt earnings and profits,
``(B) second, out of applicable earnings and profits, and
``(C) finally, out of earnings and profits not described in
subparagraph (A) or (B).
``(3) Coordination with other deductions.--Such term shall
not include--
``(A) any amount allowed as a deduction under section 591
(relating to deduction for dividends paid by mutual savings
banks, etc.), and
``(B) any dividend described in paragraph (2) of section
404(k) (relating to deduction for dividends paid on certain
employer securities).
``(4) Election to treat certain distributions paid after
close of year as paid during year.--For purposes of this
title, an eligible corporation may elect on its return of tax
for any taxable year to treat any distribution made on or
before the 15th day of the 4th month following the close of
the taxable year as having been made immediately before the
close of the taxable year. The preceding sentence shall not
apply for purposes of determining the time the distribution
was received by the shareholder to whom the distribution was
made.
``(5) Applicable earnings and profits.--
``(A) In general.--The term `applicable earnings and
profits' means, with respect to any corporation for any
taxable year, its earnings and profits for the taxable year
and its earnings and profits accumulated in prior taxable
years beginning after December 31, 2020. For purposes of the
preceding sentence, earnings and profits for the taxable year
shall be determined without regard to the deduction under
this section for the taxable year.
``(B) Exempt earnings and profits not treated as applicable
earnings and profits.--The applicable earnings and profits of
a corporation shall not include any exempt earnings and
profits (as defined in paragraph (6)).
``(C) Look-thru in the case of dividends received from
controlled foreign corporation or 10/50 corporation.--If a
corporation which is a United States shareholder in a
controlled foreign corporation, or is a shareholder in a
foreign corporation with respect to which the shareholder
meets the stock ownership requirements of section 902(a),
receives a dividend (other than a dividend to which
subparagraph (B) applies) from such controlled foreign
corporation or such foreign corporation, the earnings and
profits from such dividend shall not be treated as applicable
earnings and profits of the corporation receiving such
dividend to the extent of any portion of the dividend not
properly allocable (as determined under section 316, as
modified by section 959(c) in the case

[[Page S7621]]

of such controlled foreign corporation) to applicable
earnings and profits of such controlled foreign corporation
or such foreign corporation.
``(6) Exempt earnings and profits.--
``(A) In general.--The term `exempt earnings and profits'
means, with respect to any corporation for any taxable year,
its earnings and profits for the taxable year and its
earnings and profits accumulated in prior taxable years
beginning after December 31, 2020, which are properly
allocable to exempt amounts received or accrued by the
corporation.
``(B) Exempt amounts.--The term `exempt amounts' means,
with respect to any corporation--
``(i) any dividend to the extent of the deduction allowable
to the corporation under section 243, 245, or 245A with
respect to the dividend,
``(ii) any foreign-derived intangible income (as defined in
section 250(b)) or global intangible low-taxed income (as
defined in section 951A(b)) to the extent of the deduction
allowable to the corporation under section 250 with respect
to any such income,
``(iii) any increase in subpart F income by reason of
section 965 to the extent of the deduction allowable to the
corporation under section 965(c)(1) with respect to any such
income, and
``(iv) any other amount to the extent such amount is exempt
from taxation under this title.
``(7) Proper allocation of dividends to earnings and
profits.--
``(A) In general.--The Secretary shall prescribe rules for
the proper allocation of dividends to earnings and profits
for purposes of applying this subsection.
``(B) Look through rules.--For purposes of paragraph
(4)(C), such rules shall include rules requiring in
appropriate cases the look through to earnings and profits of
members of any affiliated group including a controlled
foreign corporation or foreign corporation described in such
paragraph where the earnings and profits of such controlled
foreign corporation or such foreign corporation are
attributable to distributions received from other members of
the group.
``(c) Eligible Corporation.--For purposes of this section,
the term `eligible corporation' means any domestic
corporation other than--
``(1) a regulated investment company,
``(2) a real estate investment trust,
``(3) an S corporation,
``(4) a corporation which is exempt from tax under section
501 or 521,
``(5) an organization taxable under subchapter T of this
chapter (relating to cooperative organizations),
``(6) a cooperative governed by the rules applicable to
cooperatives as in effect before the enactment of subchapter
T, or
``(7) a DISC or former DISC.
``(d) Reporting Requirement.--
``(1) In general.--Each eligible corporation which makes
payments of dividends during the reporting period for any
taxable year shall make a return, according to the forms and
regulations prescribed by the Secretary, setting forth--
``(A) the aggregate amount of such dividends,
``(B) the aggregate amount of such dividends with respect
to which the corporation is claiming a deduction under this
section for the taxable year,
``(C) the aggregate amount of such dividends which the
corporation paid during the period beginning on the 1st day
of the reporting taxable year and ending on the 15th day of
the 4th month of such taxable year which the corporation
elected under subsection (b)(4) to treat as paid in the
preceding taxable year,
``(D) the aggregate amount of such dividends which the
corporation paid during the period beginning on the 1st day
of the taxable year following the reporting taxable year and
ending on the 15th day of the 4th month of such following
taxable year which the corporation elected under subsection
(b)(4) to treat as paid in the reporting taxable year, and
``(E) such other information with respect to such dividends
as the Secretary shall require for the administration of this
section.
``(2) Reporting period; due date.--For purposes of this
subsection--
``(A) Reporting period.--The term `reporting period' means
with, respect to any taxable year, the period beginning on
the 1st day of the taxable year and ending on the 15th day of
the 4th month following the close of the taxable year.
``(B) Due date.--Any return under paragraph (1) with
respect to any taxable year shall be included with the return
of income tax for such taxable year.''.
(b) Penalty for Failure to Report.--Section 6652, as
amended by subtitle E of this Act, is amended by adding at
the end the following new subsection:
``(r) Failure to File Returns by Corporations Eligible for
Dividends Paid Deduction.--
``(1) Penalty for failure to file return.--In the case of a
failure to make a return required under section 242(d)
containing the information required by such section by the
due date for the return, the eligible corporation shall pay
(on notice and demand by the Secretary and in the same manner
as tax) a penalty of $1,000 per day for each day such failure
continues unless it is shown that such failure is due to
reasonable cause. The maximum amount of the penalty under
this paragraph with respect to any failure for a taxable year
shall not exceed $250,000.
``(2) Eligible corporation.--For purposes of this
subsection, the term `eligible corporation' has the meaning
given such term by section 242(c).''.
(c) Dividends Paid Deduction Allowable Only in Taxable Year
of Dividend Payment.--
(1) In general.--Subsection (d) of section 172, as amended
by section 11011, is amended by adding at the end the
following new paragraph:
``(9) Dividends paid deduction.--The deduction under
section 242 shall not be allowed.''.
(2) Treatment of carrybacks and carryovers.--Subparagraph
(A) of section 172(b)(2), as amended by section 13302, is
amended by striking ``and (5)'' and inserting ``(5), and
(8)''.
(d) Other Conforming Amendments.--Part VIII of subchapter B
of chapter 1 is amended--
(1) by striking the table of sections and inserting the
following:

``PART VIII--SPECIAL DEDUCTIONS FOR CORPORATIONS

``subpart a. allowance of special deductions.

``subpart b. dividends paid deduction.

``subpart c. dividends received deductions.

``subpart d. other deductions.

``Subpart A--Allowance of Special Deductions

``Sec. 241. Allowance of special deductions.'',
(2) by inserting the following before section 243:

``Subpart C--Dividends Received Deductions

``Sec. 243. Dividends received by corporations.
``Sec. 245. Dividends received from certain foreign corporations.
``Sec. 245A. Deduction for foreign-source portion of dividends received
by domestic corporations from specified 10-percent owned
foreign corporations.
``Sec. 246. Rules applying to deductions for dividends received.
``Sec. 246A. Dividends received deduction reduced where portfolio stock
is debt financed.'', and
(3) by inserting the following before section 248:

``Subpart D--Other Deductions

``Sec. 248. Organizational expenditures.
``Sec. 249. Limitation of deduction of bond premium on repurchase.
``Sec. 250. Foreign-derived intangible income and global intangible
low-taxed income.''.
(e) Effective Date.--The amendments made by this section
shall apply to dividends paid in taxable years of the payor
beginning after December 31, 2020.

SEC. 13012. TAX EQUIVALENT TO DIVIDENDS PAID DEDUCTION FOR
CERTAIN FOREIGN CORPORATIONS.

(a) Dividends Paid Deduction.--Paragraph (1) of section
882(c) is amended by adding at the end the following new
subparagraph:
``(C) Special rule for dividends paid deduction.--For
purposes of subparagraph (A)--
``(i) the deduction under section 242 shall not be allowed
for any taxable year, and
``(ii) there shall be allowed, in lieu of such deduction, a
deduction in an amount equal to zero percent of the dividend
equivalent amount (as defined in section 884(b)) of the
foreign corporation for the taxable year.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2020.

SEC. 13013. ALLOCATION OF DIVIDEND EXPENSE AMONG MEMBERS OF
WORLDWIDE AFFILIATED GROUPS.

(a) In General.--Paragraph (6) of section 864(e) is amended
to read as follows:
``(6) Allocation and apportionment of other expenses.--
``(A) In general.--Except as provided in subparagraph (B),
expenses other than interest which are not directly allocable
or apportioned to any specific income producing activity
shall be allocated and apportioned as if all members of the
affiliated group were a single corporation.
``(B) Dividend expense.--The dividend expense of any
domestic corporation which is a member of an affiliated group
shall be allocated and apportioned to income from sources
without the United States in the same proportion which--
``(i) the aggregate amount of income treated as from
sources without the United States by all domestic
corporations which are members of such group (determined
without regard to such dividend expense), bears to
``(ii) the aggregate income of all such domestic
corporations from sources within and without the United
States (as so determined).''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2020.

Subpart C--Restoration of Deduction for Personal Exemptions

SEC. 13021. DEDUCTION FOR PERSONAL EXEMPTIONS.

(a) In General.--Subsection (d) of section 151, as amended
by this Act, is further amended--
(1) by striking ``Except as provided in paragraph (5), in
the case of'' in paragraph (4) and inserting ``In the case
of'', and
(2) by striking paragraph (5).
(b) Application to Estates and Trusts.--Section
642(b)(2)(C), as amended by this Act, is further amended by
striking clause (iii).

[[Page S7622]]

(c) Exception for Wage Withholding Rules.--Section 3402(a),
as amended by this Act, is further amended by striking
paragraph (3).
(d) Exception for Determining Property Exempt From Levy.--
Section 6334(d), as amended by this Act, is further amended
by striking paragraph (4).
(e) Persons Required to Make Returns of Income.--Section
6012, as amended by this Act, is further amended by striking
subsection (f).
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.

SEC. 13022. OFFSETS.

(a) Adjustment of Highest Rate Bracket.--
(1) Joint returns.--The last row of the table contained in
section 1(j)(2)(A), as added by section 11001(a), is amended
to read as follows:

``Over $1,000,000.........................  $301,479, plus 39.6% of the
excess over $1,000,000.''.

(2) Heads of households.--The last row of the table
contained in section 1(j)(2)(B), as added by section
11001(a), is amended to read as follows:

``Over $500,000...........................  $149,348, plus 39.6% of the
excess over $500,000.''.

(3) Unmarried individuals.--The last row of the table
contained in section 1(j)(2)(C), as added by section
11001(a), is amended to read as follows:

``Over $500,000...........................  $150,739.50, plus 39.6% of
the excess over
$500,000.''.

(4) Married individuals filing separate returns.--The last
row of the table contained in section 1(j)(2)(D), as added by
section 11001(a), is amended to read as follows:

``Over $500,000...........................  $150,739.50, plus 39.6% of
the excess over
$500,000.''.

(5) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31,
2017.
(b) Expanded Treatment of Deferred Foreign Income Upon
Transition to Participation Exemption System of Taxation.--
Section 965, as amended by section 14103 of this Act, is
further amended to read as follows:

``SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON
TRANSITION TO PARTICIPATION 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,
2020--
``(1) all property of such foreign corporation shall be
treated as sold on the last day of such taxable year for its
fair market value, and, notwithstanding any other provision
of this title, any gain or loss arising from such sale shall
be taken into account for such taxable year to the extent
otherwise provided by this title (except that section 1091
shall not apply to any such loss), and
``(2) the subpart F income of such foreign corporation (as
otherwise determined for such taxable year under section 952
without regard to this paragraph and after application of
paragraph (1)) shall be increased by the accumulated post-
1986 deferred foreign income of such corporation determined
as of the close of such taxable year.
Proper adjustments shall be made in the amount of any gain or
loss subsequently realized for gain or loss taken into
account under paragraph (1).
``(b) Reduction in Tax Rate.--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 subsection (a)(2) an amount equal to 43 percent of the
amount so included in income.
``(c) Accumulated Post-1986 Deferred Foreign Income.--For
purposes of this section--
``(1) In general.--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 deferred foreign
income corporation which is effectively connected with the
conduct of a trade or business within the United States and
subject to tax under this chapter,
``(B) if distributed, would be excluded from the gross
income of a United States shareholder under section 959, or
``(C) in the case of any deferred foreign income
corporation described in subsection (d)(1)(B) and which is a
passive foreign investment company (as defined in section
1297)--
``(i) if distributed, would have been treated as a
distribution which is not a dividend, or
``(ii) would have been properly attributable to an
unreversed inclusion of a United States person under section
1296.
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. Such
regulations or other guidance may provide a similar rule for
purposes of subparagraph (C).
``(2) 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) accumulated in taxable years beginning after
December 31, 1986, and determined--
``(A) as of the close the taxable year referred to in
subsection (a) and after application of subsection (a)(1),
and
``(B) without diminution by reason of dividends distributed
during such taxable year.
``(d) Deferred Foreign Income Corporation.--
``(1) In general.--For purposes of this section, the term
`deferred foreign income corporation' means--
``(A) any controlled foreign corporation, and
``(B) any section 902 corporation (as defined in section
909(d)(5) as in effect before the date of the enactment of
the Tax Cuts and Jobs Act).
``(2) Application to section 902 corporations.--
``(A) In general.--For purposes of section 951, a section
902 corporation (as so defined) 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), making proper adjustments in the amount of
subsequent gains or losses to reflect such gains and losses
(including through application of section 961), and applying
subsection (f).
``(B) United states shareholder.--For purposes of this
section and the application of subparagraph (A), in the case
of a section 902 corporation (as so defined), a shareholder
which is a domestic corporation which owns 10 percent or more
of the voting stock of such section 902 corporation shall be
treated as a United States shareholder.
``(e) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section
901 for the applicable percentage of the taxes paid or
accrued (or treated as paid or accrued) with respect to any
amount which is included in gross income under section 951(a)
by reason of subsection (a).
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage is the amount (expressed as a
percentage) equal to 0.43 multiplied by the ratio of--
``(A) the amount included in gross income under section
951(a) by reason of subsection (a)(2), to
``(B) the amount included in gross income under section
951(a) by reason of subsection (a).
``(3) Denial of deduction.--No deduction shall be allowed
under this chapter for the portion of 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).
``(4) Coordination with section 78.--Section 78 shall not
apply to any tax for which credit is not allowable under
section 901 by reason of paragraph (1).
``(f) 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 pay timely assessed with respect to 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 at

[[Page S7623]]

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 may 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
described in subsection (a), over
``(ii) such taxpayer's net income tax for such taxable year
determined without regard to this section.
``(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.
``(g) Regulations.--The Secretary may prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the provisions of this section,
including rules to disregard any transfer of properties or
liabilities (including by contribution and distribution) a
substantial purpose of which is the avoidance of the purposes
of this section.''.
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