Stop Corporate Earnings Stripping Act of 2017
This bill amends the Internal Revenue Code to limit the tax deduction available to certain foreign-controlled U.S. multinational corporations for excess interest on debt incurred by such corporations (i.e., earnings stripping) by: (1) repealing the debt-to-equity ratio threshold required for such deduction, (2) reducing the permitted net interest expense threshold from 50% to 25% of the corporation's adjusted taxable income, (3) repealing the excess limitation carryforward, and (4) limiting to five years the carryforward of disallowed interest expenses with respect to amounts paid or incurred before, on, or after the date of enactment of this bill.
[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3603 Introduced in House (IH)]
<DOC>
115th CONGRESS
1st Session
H. R. 3603
To amend the Internal Revenue Code of 1986 to prevent earnings
stripping of corporations which are related to inverted corporations.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 28, 2017
Mr. Levin (for himself and Mr. Thompson of California) 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 prevent earnings
stripping of corporations which are related to inverted corporations.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Stop Corporate Earnings Stripping
Act of 2017''.
SEC. 2. PREVENTION OF EARNINGS STRIPPING OF CORPORATIONS WHICH ARE
RELATED TO INVERTED CORPORATIONS.
(a) In General.--Section 7874 of the Internal Revenue Code of 1986
is amended by redesignating subsection (g) as subsection (h) and by
inserting after subsection (f) the following new subsection:
``(g) Special Rules Applicable to Earnings Stripping and Related
Party Transactions.--
``(1) In general.--In the case of any corporation which is
a related corporation for any taxable year, section 163(j)
shall be applied with the following modifications:
``(A) 5-year limitation on carryforward of
disallowed amounts.--For purposes of determining any
amount carried to, or from, such taxable year under
subparagraph (B) of section 163(j)(1), such
subparagraph shall be applied by substituting `in the
1st succeeding taxable and in the 2nd through 5th
succeeding taxable years to the extent disallowed under
subparagraph (A) in the preceding taxable year
(determined on a first-in, first-out basis and by
treating the amount carried forward under this
subparagraph as allowed under subparagraph (A) before
amounts otherwise taken into account under subparagraph
(A))' for `in the succeeding taxable year'.
``(B) Rules for determining whether interest
limitation rules apply.--In applying section 163(j)(2)
to determine whether section 163(j) applies to such
related corporation for such taxable year--
``(i) subparagraph (A)(ii) shall be
disregarded, and
``(ii) subparagraph (B)(i)(II) shall be
applied by substituting `25 percent of the
adjusted taxable income of the corporation' for
`the sum of 50 percent of the adjusted taxable
income of the corporation plus any excess
limitation carryforward under clause (ii)' for
purposes of determining the corporation's
excess interest expense for such taxable year.
``(2) Related corporation.--For purposes of this
subsection--
``(A) In general.--The term `related corporation'
means any corporation for any taxable year if, at any
time during such taxable year, such corporation is a
member of an expanded affiliated group which includes
(at any time during such taxable year) an entity
which--
``(i) is a surrogate foreign corporation,
determined by applying subsection (a)(2)(B)--
``(I) by substituting `on or after
May 8, 2014' for `after March 4, 2003'
in clause (i) thereof,
``(II) by substituting `more than
50 percent' for `at least 60 percent'
in clause (ii) thereof, and
``(III) by disregarding the matter
following clause (iii) thereof, and
``(ii) is not treated as a domestic
corporation by reason of subsection (b).
``(B) Special rule for inclusion of noncorporate
entities.--For purposes of subparagraph (A), a
partnership or other entity (other than a corporation)
shall be treated as a member of an expanded affiliated
group if such entity controls (as determined under
section 954(d)(3)), or is controlled by (as so
determined), members of such group (including any
entity treated as a member of such group by reason of
this sentence).
``(3) Rules related to application of 5-year carryforward
of disallowed amounts.--For purposes of applying paragraph
(1)(A)--
``(A) Transition rule.--For purposes of applying
paragraph (1)(A), the term `1st succeeding taxable
year' means the later of--
``(i) the 1st succeeding taxable year after
the taxable year in which the disqualified
interest is paid or accrued (determined without
regard to subsection (j)(1)(B)), or
``(ii) the 1st taxable year beginning after
the date of the enactment of this subsection.
``(B) Amounts carried to taxable year for which
corporation is a related corporation.--Paragraph (1)(A)
shall apply to amounts carried to a taxable year to
which such paragraph applies without regard to whether
such paragraph applied to the taxable year in which
such amount was originally paid or accrued (or to any
other taxable year).
``(C) Amounts carried from taxable year for which
corporation is a related corporation.--Paragraph (1)(A)
shall apply to amounts carried from a taxable year to
which such paragraph applies (whether or not such
amount was originally paid or accrued in such taxable
year) without regard to whether such paragraph applies
to the taxable year to which carried (or to any other
taxable year).''.
(b) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after the date of the enactment of this Act.
(2) Limitation on carryforward of disallowed amounts.--For
purposes of determining any amount carried to a taxable year
beginning after the date of the enactment of this Act, the
amendments made by this Act shall apply to amounts paid or
incurred before, on, or after the date of the enactment of this
Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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