Stop Corporate Earnings Stripping Act of 2017

Summary: 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)&nbsp;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. 

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.