[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4581 Introduced in House (IH)]

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114th CONGRESS
  2d Session
                                H. R. 4581

    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

                           February 23, 2016

 Mr. Levin (for himself, Mr. Van Hollen, Mr. Pascrell, Mr. Thompson of 
 California, and Mr. Rangel) 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 2016''.

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 
                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.
                    ``(B) Exception for inverted corporations treated 
                as domestic corporations.--Such term shall not include 
                any corporation if such corporation is treated as a 
                domestic corporation by reason of subsection (b).
                    ``(C) 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).''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to taxable years beginning after the date of the 
enactment of this Act.
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