S.Amdt. 1814

SA 1814. Mr. DAINES submitted an amendment intended to be proposed to
amendment SA 1618 proposed by Mr. McConnell (for Mr. Hatch (for himself
and Ms. Murkowski)) 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 26, strike line 21 and all that follows
through page 30, line 14, and insert the following:
``(6) Franchise exception.--In the case of a taxpayer
utilizing business format franchising as a franchisor or
franchisee under part 436 of title 16, Code of Federal
Regulations, with respect to any qualified trade or business,
paragraph (2) shall be applied without regard to subparagraph
(B).
``(c) Qualified Business Income.--For purposes of this
section--
``(1) In general.--The term `qualified business income'
means, for any taxable year, the net amount of qualified
items of income, gain, deduction, and loss with respect to
any qualified trade or business of the taxpayer.
``(2) Carryover of losses.--If the net amount of qualified
income, gain, deduction, and loss with respect to qualified
trade or businesses of the taxpayer amount for any taxable
year is less than zero, such amount shall be treated as a
loss from a qualified trade or business in the succeeding
taxable year.
``(3) Qualified items of income, gain, deduction, and
loss.--For purposes of this subsection--
``(A) In general.--The term `qualified items of income,
gain, deduction, and loss' means items of income, gain,
deduction, and loss to the extent such items are--
``(i) effectively connected with the conduct of a trade or
business within the United States (within the meaning of
section 864(c), determined by substituting `qualified trade
or business (within the meaning of section 199A)' for
`nonresident alien individual or a foreign corporation' or
for `a foreign corporation' each place it appears), and
``(ii) included or allowed in determining taxable income
for the taxable year.
``(B) Exceptions.--The following investment items shall not
be taken into account as a qualified item of income, gain,
deduction, or loss:
``(i) Any item of short-term capital gain, short-term
capital loss, long-term capital gain, or long-term capital
loss.
``(ii) Any dividend, income equivalent to a dividend, or
payment in lieu of dividends described in section
954(c)(1)(G).
``(iii) Any interest income other than interest income
which is properly allocable to a trade or business.
``(iv) Any item of gain or loss described in subparagraph
(C) or (D) of section 954(c)(1) (applied by substituting
`qualified trade or business' for `controlled foreign
corporation').
``(v) Any item of income, gain, deduction, or loss taken
into account under section 954(c)(1)(F) (determined without
regard to clause (ii) thereof and other than items
attributable to notional principal contracts entered into in
transactions qualifying under section 1221(a)(7)).
``(vi) Any amount received from an annuity which is not
received in connection with the trade or business.
``(vii) Any item of deduction or loss properly allocable to
an amount described in any of the preceding clauses.
``(4) Treatment of reasonable compensation and guaranteed
payments.--Qualified business income shall not include--
``(A) reasonable compensation paid to the taxpayer by any
qualified trade or business of the taxpayer for services
rendered with respect to the trade or business,
``(B) any guaranteed payment described in section 707(c)
paid to a partner for services rendered with respect to the
trade or business, and
``(C) to the extent provided in regulations, any payment
described in section 707(a) to a partner for services
rendered with respect to the trade or business.
``(d) Qualified Trade or Business.--For purposes of this
section--
``(1) In general.--The term `qualified trade or business'
means any trade or business other than a specified service
trade or business.
``(2) Specified service trade or business.--
``(A) In general.--The term `specified service trade or
business' means any trade or business involving the
performance of services described in section 1202(e)(3)(A),
including investing and investment management, trading, or
dealing in securities (as defined in section 475(c)(2)),
partnership interests, or commodities (as defined in section
475(e)(2)).
``(B) Franchise exception.--Such term does not include any
trade or business utilizing business format franchising as a
franchisor or franchisee under part 436 of title 16, Code of
Federal Regulations.
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