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131 STAT. 2119 PUBLIC LAW 115–97—DEC. 22, 2017 interest allocated to the partner under clause (i)(II) which has previously been treated under clause (ii) as business interest paid or accrued by the partner. The preceding sentence shall also apply to transfers of the partnership interest (including by reason of death) in a transaction in which gain is not recognized in whole or in part. No deduction shall be allowed to the transferor or transferee under this chapter for any excess business interest resulting in a basis increase under this subclause. ‘‘(C) EXCESS TAXABLE INCOME.—The term ‘excess tax- able income’ means, with respect to any partnership, the amount which bears the same ratio to the partnership’s adjusted taxable income as— ‘‘(i) the excess (if any) of— ‘‘(I) the amount determined for the partnership under paragraph (1)(B), over ‘‘(II) the amount (if any) by which the business interest of the partnership, reduced by the floor plan financing interest, exceeds the business interest income of the partnership, bears to ‘‘(ii) the amount determined for the partnership under paragraph (1)(B). ‘‘(D) APPLICATION TO S CORPORATIONS.—Rules similar to the rules of subparagraphs (A) and (C) shall apply with respect to any S corporation and its shareholders. ‘‘(5) BUSINESS INTEREST.—For purposes of this subsection, the term ‘business interest’ means any interest paid or accrued on indebtedness properly allocable to a trade or business. Such term shall not include investment interest (within the meaning of subsection (d)). ‘‘(6) BUSINESS INTEREST INCOME.—For purposes of this sub- section, the term ‘business interest income’ means the amount of interest includible in the gross income of the taxpayer for the taxable year which is properly allocable to a trade or business. Such term shall not include investment income (within the meaning of subsection (d)). ‘‘(7) TRADE OR BUSINESS.—For purposes of this subsection— ‘‘(A) IN GENERAL.—The term ‘trade or business’ shall not include— ‘‘(i) the trade or business of performing services as an employee, ‘‘(ii) any electing real property trade or business, ‘‘(iii) any electing farming business, or ‘‘(iv) the trade or business of the furnishing or sale of— ‘‘(I) electrical energy, water, or sewage disposal services, ‘‘(II) gas or steam through a local distribution system, or ‘‘(III) transportation of gas or steam by pipe- line, if the rates for such furnishing or sale, as the case may be, have been established or approved by a State or political subdivision thereof, by any agency or instrumentality of the United States, by a public service or public utility commission or other similar VerDate Sep 11 2014 10:09 Oct 18, 2018 Jkt 079139 PO 00097 Frm 00067 Fmt 6580 Sfmt 6581 E:\PUBLAW\PUBL097.115 PUBL097 dkrause on DSKBC28HB2PROD with PUBLAWS