[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 3382 Introduced in Senate (IS)]

<DOC>






114th CONGRESS
  2d Session
                                S. 3382

 To amend title 31, United States Code, to provide for the issuance of 
  Green Bonds and to establish the United States Green Bank, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 22, 2016

Mr. Murphy (for himself, Mr. Blumenthal, and Mr. Whitehouse) introduced 
the following bill; which was read twice and referred to the Committee 
                               on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend title 31, United States Code, to provide for the issuance of 
  Green Bonds and to establish the United States Green Bank, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. CAPITALIZATION, METHOD OF CAPITAL STOCK PAYMENTS, ISSUANCE 
              OF GREEN BONDS.

    Chapter 31 of title 31, United States Code, is amended by adding 
after section 3102 the following new section:
``Sec. 3102A. Green Bonds
    ``(a) Initial Capitalization.--The Secretary of the Treasury shall 
issue bonds (in this section referred to as `Green Bonds') in the 
amount of $10,000,000,000 on the credit of the United States to acquire 
capital stock of the United States Green Bank (established under 
section 9801 of this title). Stock certificates evidencing ownership in 
the United States Green Bank shall be issued by the Green Bank to the 
Secretary of the Treasury, to the extent of payments made for the 
capital stock of the Green Bank.
    ``(b) Future Capitalization.--Upon the request of the United States 
Green Bank, the Secretary of the Treasury shall issue additional Green 
Bonds on the credit of the United States to acquire additional capital 
stock of the United States Green Bank in an aggregate amount not to 
exceed $50,000,000,000 outstanding at any one time.
    ``(c) Denominations and Maturity.--Green Bonds shall be in such 
forms and denominations, and shall mature within such periods, as 
determined by the Secretary of the Treasury.
    ``(d) Interest.--Green Bonds shall bear interest at a rate not less 
than the current average yield on outstanding market obligations of the 
United States of comparable maturity during the month preceding the 
issuance of the obligation as determined by the Secretary of the 
Treasury.
    ``(e) Guaranteed.--Green Bonds shall be fully and unconditionally 
guaranteed both as to interest and principal by the United States, and 
such guaranty shall be expressed on the face of each bond.
    ``(f) Lawful Investments.--Green Bonds shall be lawful investments, 
and may be accepted as security for all fiduciary, trust, and public 
funds, the investment or deposit of which shall be under the authority 
or control of the United States or any officer or officers thereof.''.

SEC. 2. GREEN BANK.

    Title 31, United States Code, is amended by adding the following 
new chapter at the end thereof:

                        ``CHAPTER 98--GREEN BANK

``Sec. 9801. United States Green Bank
    ``(a) Short Title.--This section may be cited as the `United States 
Green Bank Act of 2016'.
    ``(b) Purposes.--The purposes of this section are as follows:
            ``(1) To significantly increase the pace and amount of 
        investment in clean energy and energy efficiency projects at 
        the State and local level.
            ``(2) To improve the standard of living for Americans by 
        delivering clean electricity more efficiently and at lower cost 
        and by funding projects that will create high-paying, long-term 
        jobs.
            ``(3) To address the main impediment to investment at the 
        State and local level--limited capital and tight balance 
        sheets--by establishing a national Green Bank to capitalize 
        legitimate Regional, State, and Municipal Green Banks.
            ``(4) To facilitate--
                    ``(A) efficient tax equity markets for qualified 
                clean energy projects; and
                    ``(B) the financing of long-term clean energy 
                purchasing by governmental and nongovernmental not-for-
                profit entities.
            ``(5) To foster--
                    ``(A) the development and consistent application of 
                transparent underwriting standards, standard 
                contractual terms, and measurement and verification 
                protocols for qualified clean energy projects and 
                qualified energy efficiency projects;
                    ``(B) the creation of performance data that enables 
                effective underwriting, risk management, and pro forma 
                modeling of financial performance of qualified clean 
                energy projects and qualified energy efficiency 
                projects to support primary financing markets and 
                stimulate development of secondary investment markets 
                for clean energy projects and energy efficiency 
                projects; and
                    ``(C) the level of financing support for qualified 
                clean energy projects and qualified energy efficiency 
                projects necessary to advance vital national 
                objectives, including--
                            ``(i) achieving energy independence from 
                        foreign energy sources;
                            ``(ii) abating climate change by increasing 
                        zero or low carbon electricity generation and 
                        transportation capabilities;
                            ``(iii) realizing energy efficiency 
                        potential in existing infrastructure;
                            ``(iv) easing the economic effects of 
                        transitioning from a carbon-based economy to a 
                        clean energy economy;
                            ``(v) achieving job creation through the 
                        construction and operation of qualified clean 
                        energy projects and qualified energy efficiency 
                        projects;
                            ``(vi) fostering long-term domestic 
                        manufacturing capacity in the clean energy and 
                        energy efficiency industries; and
                            ``(vii) complementing and supplementing 
                        other clean energy and energy efficiency 
                        legislation at the regional, State, municipal, 
                        and county level.
    ``(c) Definitions.--In this section:
            ``(1) Bank.--The term `Bank' means the United States Green 
        Bank established under subsection (d).
            ``(2) Board.--The term `Board' means the Board of Directors 
        of the Bank.
            ``(3) Clean energy project.--The term `clean energy 
        project' means any electricity generation, transmission, 
        storage, heating, cooling, transportation, distribution, 
        industrial process, or manufacturing project whose primary 
        purpose is the deployment, development, or production of an 
        energy system or technology that avoids, reduces, or sequesters 
        air pollutants or anthropogenic greenhouse gases, including the 
        following:
                    ``(A) Solar.
                    ``(B) Wind.
                    ``(C) Geothermal.
                    ``(D) Biomass.
                    ``(E) Hydropower.
                    ``(F) Ocean and hydrokinetic.
                    ``(G) Fuel cell.
                    ``(H) Advanced battery.
                    ``(I) Carbon capture and sequestration.
                    ``(J) Next generation biofuels from nonfood 
                feedstocks.
                    ``(K) Alternative vehicle fuel infrastructure.
                    ``(L) Alternative fuel vehicles.
            ``(4) Eligible clean energy financing institution.--The 
        term `Eligible Clean Energy Financing Institution' means a not-
        for-profit, independent entity, quasi-independent entity, or a 
        governmental entity within an agency or financing authority, 
        established or designated by a State, group of States, the 
        District of Columbia, or an Eligible State Political 
        Subdivision to--
                    ``(A) provide low-cost or long-term financing 
                support or credit enhancements, including loan 
                guarantees and loan loss reserves, for Qualified Clean 
                Energy Projects or Qualified Energy Efficiency 
                Projects; and
                    ``(B) create liquid markets for these projects 
                including warehousing and securitization, or take other 
                steps to reduce financial barriers to the deployment of 
                existing and innovative clean energy and energy 
                efficiency projects. Eligible Clean Energy Financing 
                Institutions may enter into partnerships with private 
                entities.
            ``(5) Eligible state political subdivision.--The term 
        `Eligible State Political Subdivision' shall mean any 
        municipality, county or other political subdivision within a 
        State that, based on the population data from the most recent 
        U.S. Census Bureau, meets the following criteria--
                    ``(A) a municipality with a population of no less 
                than 200,000 people;
                    ``(B) a county, parish or borough with a population 
                of no less than 800,000 people; or
                    ``(C) a municipality, county, parish, or borough 
                with a population--
                            ``(i) of no less than 84,000 people; and
                            ``(ii) that constitutes no less than 5 
                        percent of that State's total population.
            ``(6) Energy efficiency project.--The term `energy 
        efficiency project' means any project, technology, function, or 
        measure that results in the reduction of energy use required to 
        achieve the same level of service or output prior to the 
        application of such project, technology, function, or measure, 
        or substantially reduces greenhouse gas emissions relative to 
        emissions that would have occurred prior to the application of 
        such project, technology, function, or measure.
            ``(7) Green bond.--The term `Green Bond' means a bond 
        issued pursuant to section 3102A of this title.
            ``(8) Qualified clean energy project.--The term `qualified 
        clean energy project' means a clean energy project that--
                    ``(A) is a Clean Energy Project carried out 
                domestically within the territorial borders of the 
                United States;
                    ``(B) stays current on interest and debt payment 
                obligations;
                    ``(C) to the extent otherwise required by law, pays 
                wages in accordance with subchapter IV of chapter 31 of 
                title 40, United States Code (commonly referred to as 
                the Davis-Bacon Act);
                    ``(D) if for nuclear power, is funded by the Bank 
                only after all other existing Federal financial support 
                has been expended;
                    ``(E) if for Alternative fuel vehicles, is for the 
                purchase or lease of eligible vehicles and not the 
                design or manufacture thereof; and
                    ``(F) satisfies any other conditions established by 
                the Bank and published in the Federal Register.
            ``(9) Qualified energy efficiency project.--The term 
        `qualified energy efficiency project' means an energy 
        efficiency project, including smart grid technologies and 
        functions characterized in section 1301 of the Energy 
        Independence and Security Act of 2007 and end-use technologies 
        for efficiency gains in new construction and across existing 
        infrastructure that--
                    ``(A) is an Energy Efficiency Project carried out 
                domestically within the territorial borders of the 
                United States;
                    ``(B) stays current on interest and debt payment 
                obligations;
                    ``(C) to the extent otherwise required by law, pays 
                wages in accordance with subchapter IV of chapter 31 of 
                title 40, United States Code (commonly referred to as 
                the Davis-Bacon Act); and
                    ``(D) satisfies any other conditions established by 
                the Bank and published in the Federal Register.
    ``(d) Green Bank.--
            ``(1) Establishment of corporation.--There is established a 
        corporation to be known as the United States Green Bank that 
        shall be wholly owned by the United States.
            ``(2) Oversight.--The Bank shall be subject to the general 
        supervision and direction of the Secretary of the Treasury. The 
        Bank shall be an instrumentality of the United States 
        Government and shall maintain such offices as may be necessary 
        or appropriate in the conduct of its business.
            ``(3) Charter.--The Bank shall be chartered for 20 years 
        from the date of enactment of this section.
            ``(4) Governance.--
                    ``(A) Board of directors of the bank.--
                            ``(i) In general.--The Bank shall be under 
                        the direction of a Board of Directors 
                        consisting of 7 members and be subject to the 
                        general supervision and direction of the 
                        Secretary of the Treasury as Chairman of the 
                        Board.
                            ``(ii) Membership.--The Board shall consist 
                        of 7 members, as follows:
                                    ``(I) The Secretary of the Treasury 
                                or the Secretary's designee as Chairman 
                                of the Board.
                                    ``(II) The Secretary of Energy or 
                                the Secretary's designee.
                                    ``(III) The Secretary of 
                                Transportation or the Secretary's 
                                designee.
                                    ``(IV) 4 members appointed by the 
                                President of the United States 
                                including a Chief Executive Officer, 1 
                                member with expertise regarding 
                                renewable energy and/or energy 
                                efficiency, 1 member with expertise 
                                regarding finance, 1 member with 
                                expertise regarding electric utilities, 
                                and 1 member with expertise regarding 
                                sustainable transportation.
                            ``(iii) Quorum.--4 members of the Board 
                        shall constitute a quorum.
                            ``(iv) Bylaws.--The Board shall adopt, and 
                        may amend, such bylaws as are necessary for the 
                        proper management and functioning of the Bank, 
                        and shall, in such bylaws, designate the vice 
                        presidents and other officers of the Bank and 
                        prescribe their duties.
                            ``(v) Terms.--The initial terms of the 
                        members of the Board shall be 4 years. For 
                        terms beginning after the first 4 years 
                        following the date of the enactment of this 
                        section, the Board shall create staggered terms 
                        of 2, 3, and 4 years for members of the Board.
                            ``(vi) Vacancies.--Any vacancy on the Board 
                        shall be filled in the same manner in which the 
                        original appointment was made.
                            ``(vii) Interim appointments.--Any member 
                        appointed to fill a vacancy occurring before 
                        the expiration of the term for which such 
                        member's predecessor was appointed shall be 
                        appointed only for the remainder of such term.
                            ``(viii) Reappointment.--Members of the 
                        Board may be reappointed for additional terms 
                        of service as members of the Board.
                            ``(ix) Continuation of service.--Any member 
                        of the Board whose term has expired may 
                        continue to serve on the Board until the 
                        earlier of--
                                    ``(I) the date on which such 
                                member's successor is appointed; or
                                    ``(II) the end of the 6-month 
                                period beginning on the date such 
                                member's term expires.
                            ``(x) Chairman.--The Board shall select a 
                        Chairman from among its members.
                    ``(B) Executive vice president.--The Chief 
                Executive Officer shall appoint an Executive Vice 
                President who--
                            ``(i) shall serve as Chief Executive 
                        Officer of the Bank during the absence or 
                        disability of, or in the event of a vacancy in 
                        the office, of Chief Executive Officer; and
                            ``(ii) shall at other times perform such 
                        functions as the Chief Executive Officer may 
                        prescribe.
                    ``(C) Policies and procedures.--At the request of 
                any 2 members of the Board, the Chairman shall place an 
                item pertaining to the policies or procedures of the 
                Bank on the agenda for discussion by the Board. Not 
                later than 30 days after the date such a request is 
                made, the Chairman shall hold a meeting of the Board at 
                which such item shall be discussed.
                    ``(D) Conflicts of interest.--No director, officer, 
                attorney, agent, or employee of the Bank shall in any 
                manner, directly or indirectly, participate in the 
                deliberation upon, or the determination of, any 
                question affecting such individual's personal 
                interests, or the interests of any corporation, 
                partnership, or association in which such individual is 
                directly or indirectly personally interested.
            ``(5) Hiring and contracting authority.--
                    ``(A) Contracting.--The Bank may employ or 
                otherwise contract with banks, credit agencies, 
                attorneys, and other third parties at customary 
                commercial rates.
                    ``(B) Hiring.--Notwithstanding any otherwise 
                applicable Federal rules and regulations, the Bank may 
                employ and otherwise contract with employees and 
                provide compensation to such employees at prevailing 
                rates for compensation for similar positions in private 
                industry.
            ``(6) Sunset.--
                    ``(A) Expiration of charter.--The Bank shall 
                continue to exercise its functions until all 
                obligations and commitments of the Bank are discharged, 
                even after its charter has expired.
                    ``(B) Prior obligations.--No provisions of this 
                subsection shall be construed as preventing the Bank 
                from--
                            ``(i) acquiring obligations prior to the 
                        date of the expiration of its charter which 
                        mature subsequent to such date;
                            ``(ii) assuming, prior to the date of the 
                        expiration of its charter, liability as 
                        guarantor, endorser, or acceptor of obligations 
                        which mature subsequent to such date;
                            ``(iii) issuing, prior or subsequent to the 
                        date of the expiration of its charter, for 
                        purchase by the Secretary of the Treasury or 
                        any other purchasers, its notes, debentures, 
                        bonds, or other obligations which mature 
                        subsequent to such date; or
                            ``(iv) continuing as a corporation and 
                        exercising any of its functions subsequent to 
                        the date of the expiration of its charter for 
                        purposes of orderly liquidation, including the 
                        administration of its assets and the collection 
                        of any obligations held by the Bank.
    ``(e) Green Bank Establishment Fund.--
            ``(1) Establishment.--There is established in the Treasury 
        of the United States a revolving fund, to be known as the 
        `Green Bank Establishment Fund' (hereinafter referred to as the 
        `Fund'), consisting of--
                    ``(A) such amounts as are deposited in the Fund 
                under this subtitle, including but not limited to 
                proceeds from the Green Bonds issued under section 
                3102A; and
                    ``(B) such sums as may be appropriated to 
                supplement the Fund.
            ``(2) Authorization of appropriations.--There are 
        authorized to be appropriated to the Fund such sums as are 
        necessary to carry out this subtitle.
            ``(3) Expenditures from the fund.--Amounts in the Fund 
        shall be available to the Chief Executive for obligation 
        without fiscal year limitation, to remain available until 
        expended.
    ``(f) Lending, Financing, Expenditures.--
            ``(1) In general.--The Bank shall establish a program to 
        provide, on a competitive basis loans, loan guarantees or 
        credit buy downs from the Fund, as the Bank determines 
        appropriate, solely to provide capitalization to an Eligible 
        Clean Energy Financing Institution for the establishment or 
        continuing operation of that entity.
            ``(2) Requirements.--The Bank may only provide loans, loan 
        guarantees or credit buy downs under paragraph (1) if:
                    ``(A) Application.--The applicant submits an 
                application for loans, loan guarantees or credit buy 
                downs in accordance with application criteria 
                established by the Bank.
                    ``(B) Eligible clean energy financing 
                institutions.--An entity is eligible to receive loans, 
                loan guarantees or credit buy downs under this section 
                only if it--
                            ``(i) meets the definition of Eligible 
                        Clean Energy Financing Institution;
                            ``(ii) uses the funding from the Bank 
                        solely for the purposes described in this 
                        section; and
                            ``(iii) satisfies the capitalization and 
                        funding requirements as described in this 
                        section.
                    ``(C) Project finance.--The Bank shall not directly 
                lend or otherwise provide financial products to any 
                individual projects, nor shall it be required to 
                examine individual projects for the purposes of lending 
                under paragraph (1) other than as necessary to 
                determine whether an applicant meets the criteria for 
                Eligible Clean Energy Financing Institutions.
                    ``(D) Capitalization and co-funding.--The Eligible 
                Clean Energy Financing Institution--
                            ``(i) must provide, at the time of receipt 
                        of any initial funding for capitalization by 
                        the Bank, an amount from funding sources other 
                        than the Bank equivalent to no less than 
                        $1,000,000 and no less than 20 percent of the 
                        total initial funding provided by the Bank; and
                            ``(ii) may not receive any subsequent 
                        funding for capitalization by the Bank, in 
                        addition to any initial funding for 
                        capitalization provided by the Bank in 
                        accordance with (i) above in, of amounts 
                        greater than two times the amount of capital 
                        committed for use by the Eligible Clean Energy 
                        Financing Institution for Qualified Clean 
                        Energy Projects and Qualified Energy Efficiency 
                        Projects at the time of application.
            ``(3) Regulations.--The Bank shall establish regulations to 
        carry out the activities and operations set out in this 
        chapter.
    ``(g) Lending Activities.--
            ``(1) Fees.--The Bank shall assess reasonable fees on its 
        activities so as to cover its reasonable costs and expenses, 
        consistent with the Federal Credit Reform Act of 1990 (2 U.S.C. 
        661 et seq.), provided the Bank operates as a not-for-profit 
        entity.
            ``(2) Appropriations and retention of receipts.--For 
        purposes of the Federal Credit Reform Act, funds made available 
        to the Green Bank pursuant to section 3102A for carrying out 
        this section are appropriated to the Green Bank for the 
        purposes described in the section. Receipts collected by the 
        Green Bank, consistent with the Federal Credit Reform Act, 
        shall be considered to have been provided in advance in an 
        appropriations Act, and shall remain available to the Green 
        Bank until expended.
            ``(3) Immunity from impairment, limitation, or 
        restriction.--
                    ``(A) In general.--All rights and remedies of the 
                Bank shall be immune from impairment, limitation, or 
                restrictions by or under--
                            ``(i) any law (other than a law enacted by 
                        Congress expressly in limitation of this 
                        paragraph) that becomes effective after the 
                        acquisition by the Bank of the subject or 
                        property on, under, or with respect to which 
                        the right or remedy arises or exists or would 
                        so arise or exist in the absence of the law; or
                            ``(ii) any administrative or other action 
                        that becomes effective after the acquisition.
                    ``(B) State law.--The Bank may conduct its business 
                without regard to any qualification or law of any State 
                relating to incorporation.
            ``(4) Taxation.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Bank (including its activities, capital, reserves, 
                surplus and income) shall be exempt from all taxation 
                imposed by any State or local political subdivision of 
                a State.
                    ``(B) Real property.--Any real property of the Bank 
                shall be subject to taxation by a State or political 
                subdivision of a State to the same extent according to 
                the value of the real property as other real property 
                is taxed.
            ``(5) Power to remove; jurisdiction.--Notwithstanding any 
        other provision of law, any civil action, suit, or proceeding 
        to which the Bank is a party shall be deemed to arise under the 
        laws of the United States, and the United States district 
        courts shall have original jurisdiction. The Bank may, without 
        bond or security, remove any such action, suit, or proceeding 
        from a State court to a United States district court or to the 
        United States District Court for the District of Columbia.
            ``(6) Spending safeguards.--
                    ``(A) In general.--The Chief Executive Officer of 
                the Bank--
                            ``(i) shall require any Eligible Clean 
                        Energy Financing Institution receiving 
                        financial support pursuant to this section to 
                        report quarterly, in a format specified by the 
                        Chief Executive Officer, on such entity's use 
                        of such support and its progress fulfilling the 
                        objectives for which such support was granted, 
                        and the Chief Executive Officer shall make 
                        these reports available to the public;
                            ``(ii) may establish additional reporting 
                        and information requirements for any recipient 
                        of financing support made available pursuant to 
                        this section;
                            ``(iii) shall establish appropriate 
                        mechanisms to ensure appropriate use and 
                        compliance with all terms of any financing 
                        support made available pursuant to this 
                        section;
                            ``(iv) may, in addition to and consistent 
                        with any other authority under applicable law, 
                        deobligate financing support made available 
                        pursuant to this section to entities that 
                        demonstrate an insufficient level of 
                        performance, or wasteful or fraudulent 
                        spending, as defined in advance by the Chief 
                        Executive Officer, and award these funds 
                        competitively to new or existing applicants 
                        consistent with this section;
                            ``(v) shall create and maintain a fully 
                        searchable database, accessible on the Internet 
                        (or successor protocol) at no cost to the 
                        public, that contains at least--
                                    ``(I) a list of each entity that 
                                has applied for loans, loan guarantees 
                                or credit buy downs under this section;
                                    ``(II) a description of each 
                                application;
                                    ``(III) the status of each such 
                                application;
                                    ``(IV) the name of each entity 
                                receiving funds made available pursuant 
                                to this section;
                                    ``(V) the purpose for which such 
                                entity is receiving such funds;
                                    ``(VI) each quarterly report 
                                submitted by the entity pursuant to 
                                this section; and
                                    ``(VII) information related to 
                                Qualifying Clean Energy Projects and 
                                Qualifying Energy Efficiency Projects 
                                funded by Eligible Clean Energy 
                                Financing Institutions using funding 
                                received from the Bank;
                            ``(vi) to the extent practicable, data 
                        maintained under clause (v) shall be used to 
                        inform private capital markets, including the 
                        development of underwriting standards for the 
                        financing of clean energy projects and energy 
                        efficiency projects;
                            ``(vii) shall make all financing 
                        transactions available for public inspection, 
                        including formal annual reviews by both a 
                        private auditor and the Comptroller General; 
                        and
                            ``(viii) shall at all times be available to 
                        receive public comment in writing on the 
                        activities of the Bank.
                    ``(B) Protection of confidential business 
                information.--To the extent necessary and appropriate, 
                the Chief Executive Officer may redact any information 
                regarding applicants and borrowers to protect 
                confidential business information.
            ``(7) Guarantee.--Except as provided in section 3102A(e) 
        with respect to Green Bonds, financial support provided by the 
        Bank shall not be fully and unconditionally guaranteed by the 
        United States.''.

SEC. 3. CONFORMING AMENDMENTS.

    (a) Tax Exempt Status.--Section 501(l) of the Internal Revenue Code 
of 1986 is amended by adding at the end the following:
            ``(4) The Green Bank established under section 9801 of 
        title 31, United States Code.''.
    (b) Wholly Owned Government Corporation.--Section 9101(3) of title 
31, United States Code, is amended by adding at the end the following:
                    ``(S) the Green Bank.''.
    (c) Clerical Amendments.--
            (1) The table of sections for chapter 31 of title 31, 
        United States Code, is amended by inserting after the item 
        relating to section 3102 the following new item:

``3102A. Green bonds.''.
            (2) The table of chapters for subtitle VI of title 31, 
        United States Code, is amended by adding at the end the 
        following new item:

``98. Green Bank............................................    9801''.

SEC. 4. DEFER DEDUCTION OF INTEREST EXPENSE RELATED TO DEFERRED INCOME.

    (a) In General.--Section 163 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Deferral of Deduction for Interest Expense Related to 
Deferred Income.--
            ``(1) General rule.--In the case of any taxpayer, the 
        amount of foreign-related interest expense allowed as a 
        deduction under this chapter for any taxable year shall not 
        exceed an amount that bears the same ratio to the sum of the 
        foreign-related interest expense for such year and the deferred 
        foreign-related interest expense as the current inclusion 
        ratio.
            ``(2) Treatment of deferred deductions.--If, for any 
        taxable year--
                    ``(A) the amount that bears the same ratio to the 
                sum of the foreign-related interest expense for such 
                year and the deferred foreign-related interest expense 
                as the current inclusion ratio, exceeds
                    ``(B) the foreign-related interest expense for such 
                year, there shall be allowed as a deduction for such 
                year an amount equal to the lesser of such excess and 
                the deferred foreign-related interest expense.
            ``(3) Definitions and special rule.--For purposes of this 
        subsection--
                    ``(A) Foreign-related interest expense.--The term 
                `foreign-related interest expense' means, for any 
                taxable year, an amount of interest expense for such 
                taxable year allocated and apportioned under sections 
                861 and 864(e) to income from sources outside the 
                United States which bears the same proportion to such 
                interest expense as the value of all stock held by the 
                taxpayer in all section 902 corporations (as defined in 
                section 909(d)(5)) with respect to which the taxpayer 
                meets the ownership requirements of subsection (a) or 
                (b) of section 902 bears to the value of all assets of 
                the taxpayer which generate gross income from sources 
                outside the United States.
                    ``(B) Deferred foreign-related interest expense.--
                The term `deferred foreign-related interest expense' 
                means the excess, if any, of the aggregate foreign-
                related interest expense for all prior taxable years, 
                over the aggregate amount allowed as a deduction under 
                paragraphs (1) and (2) for all prior taxable years.
                    ``(C) Value of assets.--Except as otherwise 
                provided by the Secretary, for purposes of paragraph 
                (3)(A)(i), the value of any asset shall be the amount 
                with respect to such asset used as determined for 
                purposes of allocating and apportioning interest 
                expense under sections 861 and 864(e).
                    ``(D) Current inclusion ratio.--The term `current 
                inclusion ratio' means, with respect to any domestic 
                corporation which meets the ownership requirements of 
                subsection (a) or (b) of section 902 with respect to 
                one or more section 902 corporations for any taxable 
                year, the ratio (expressed as a percentage) of--
                            ``(i) the sum of all dividends received by 
                        the domestic corporation from a section 902 
                        corporation during the taxable year plus 
                        amounts includible in gross income under 
                        section 951(a) from such section 902 
                        corporation, in each case computed without 
                        regard to section 78, divided by
                            ``(ii) the aggregate amount of post-1986 
                        undistributed earnings for the taxable year.
                    ``(E) Aggregate amount of post-1986 undistributed 
                earnings.--The term `aggregate amount of post-1986 
                undistributed earnings' means, with respect to any 
                domestic corporation which meets the ownership 
                requirements of subsection (a) or (b) of section 902 
                with respect to one or more section 902 corporations, 
                the domestic corporation's pro rata share of the post-
                1986 undistributed earnings (as defined in section 
                902(c)(1)) of all such section 902 corporations.
                    ``(F) Foreign currency conversion.--For purposes of 
                determining the current inclusion ratio, and except as 
                otherwise provided by the Secretary, the aggregate 
                amount of post-1986 undistributed earnings for the 
                taxable year shall be determined by translating each 
                section 902 corporation's post-1986 undistributed 
                earnings into dollars using the average exchange rate 
                for such year.
            ``(4) Treatment of affiliated groups.--The current 
        inclusion ratio of each member of an affiliated group (as 
        defined in section 864(e)(5)(A)) shall be determined as if all 
        members of such group were a single corporation.
            ``(5) Application to separate categories of income.--This 
        subsection shall be applied separately with respect to the 
        categories of income specified in section 904(d)(1).
            ``(6) Regulations.--The Secretary may prescribe such 
        regulations or other guidance as is necessary or appropriate to 
        carry out the purposes of this subsection, including 
        regulations or other guidance providing--
                    ``(A) for the proper application of this subsection 
                with respect to changes in ownership of a section 902 
                corporation,
                    ``(B) that certain corporations that otherwise 
                would not be members of the affiliated group will be 
                treated as members of the affiliated group for purposes 
                of this subsection,
                    ``(C) for the proper application of this subsection 
                with respect to the taxpayer's share of a deficit in 
                earnings and profits of a section 902 corporation,
                    ``(D) for appropriate adjustments to the 
                determination of the value of stock in any section 902 
                corporation for purposes of this subsection or to the 
                foreign-related interest expense to account for income 
                that is subject to tax under section 882(a)(1), and
                    ``(E) for the proper application of this subsection 
                with respect to interest expense that is directly 
                allocable to income with respect to certain assets.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning on or after January 1, 2017.
                                 <all>