Corporate Fair Share Tax Act

Summary: Corporate Fair Share Tax Act - Amends the Internal Revenue Code to limit the tax deduction of the interest expense of a U.S. corporation that is a member of a financial reporting group (a group that prepares consolidated financial statements according to accepted accounting principles or international financial reporting standards) to: (1) the amount of interest on indebtedness of the corporation includible in the corporation's gross income for the taxable year plus its proportionate share of the group's net interest expense in the taxable year; or (2) 10% of the corporation's adjusted taxable income, if the corporation fails to substantiate its proportionate share of interest expense. Exempts a corporation that is predominantly engaged in the active conduct of a banking, financing, or similar business or that has less than $5 million of net interest expense for the taxable year. 

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Corporate Fair Share Tax Act''.

SEC. 2. LIMITATION ON INTEREST DEDUCTION FOR EXCESSIVE INTEREST OF 
              MEMBERS OF FINANCIAL REPORTING GROUPS.

    (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:
    ``(n) Limitation on Excessive Interest of Members of Financial 
Reporting Groups.--
            ``(1) Limitation.--
                    ``(A) In general.--If this subsection applies to 
                any corporation for any taxable year, no deduction 
                shall be allowed under this chapter for the taxable 
                year for interest expense to the extent that such 
                expense exceeds the sum of--
                            ``(i) the amount of interest on 
                        indebtedness of the corporation includible in 
                        the corporation's gross income for the taxable 
                        year, plus
                            ``(ii) the corporation's proportionate 
                        share of the financial reporting group's net 
                        interest expense for the taxable year computed 
                        under United States income tax principles.
                    ``(B) Proportionate share of net interest 
                expense.--For purposes of subparagraph (A)(ii)--
                            ``(i) In general.--A corporation's 
                        proportionate share of the financial reporting 
                        group's net interest expense means the amount 
                        equal to the percentage of the group's net 
                        interest expense which bears the same 
                        percentage as the corporation's earnings bears 
                        to the group's earnings.
                            ``(ii) Earnings.--For purposes of clause 
                        (i), earnings shall be the sum of net earnings 
                        plus net interest expense, taxes, depreciation, 
                        and amortization.
                            ``(iii) Determinations relating to 
                        earnings.--For purposes of clause (ii), 
                        earnings, net interest expense, taxes, 
                        depreciation, and amortization with respect to 
                        a financial reporting group shall be as 
                        reflected on the financial reporting group's 
                        financial statements for the taxable year 
                        ending in the taxable year of the corporation.
                    ``(C) Alternative determination.--In lieu of the 
                limitation in subparagraph (A), if--
                            ``(i) a corporation fails to substantiate 
                        the corporation's proportionate share of the 
                        financial reporting group's net interest 
                        expense for a taxable year, or
                            ``(ii) a corporation so elects,
                no deduction shall be allowed under this chapter for 
                the taxable year for interest expense to the extent 
                that such expense exceeds 10 percent of the 
                corporation's adjusted taxable income (as defined under 
                subsection (j)(6)(A)).
            ``(2) Corporations to which subsection applies.--
                    ``(A) In general.--This subsection shall apply to 
                any corporation for any taxable year if the corporation 
                is a member of a financial reporting group.
                    ``(B) Certain corporations not included.--This 
                subsection shall not apply to any corporation which--
                            ``(i) is a corporation predominantly 
                        engaged in the active conduct of a banking, 
                        financing, or similar business, or
                            ``(ii) has less than $5,000,000 of net 
                        interest expense for the taxable year.
                    ``(C) Financial reporting group.--For purposes of 
                subparagraph (A), the term `financial reporting group' 
                means a group that prepares consolidated financial 
                statements in accordance with United States generally 
                accepted accounting principles, international financial 
                reporting standards, or other method authorized by the 
                Secretary of the Treasury under regulations. Such term 
                shall not include any corporation described in 
                subparagraph (B)(i).
                    ``(D) Subgroups.--For purposes of this subsection, 
                all members of an expanded affiliated group (as defined 
                in section 7874(c)(1)) shall be treated as 1 
                corporation.
            ``(3) Net interest expense.--The term `net interest 
        expense' has the meaning given such term by subsection 
        (j)(6)(B).
            ``(4) Carryforward.--
                    ``(A) Disallowed interest.--Any amount disallowed 
                under subparagraph (A) or (C) for any taxable year 
                shall be treated as an interest expense in the next 
                taxable year, and such amount shall not be taken into 
                account for purposes of applying subsection 
                (j)(2)(A)(ii) for such taxable year.
                    ``(B) Excess limitation.--The excess (if any) of 
                the sum determined under paragraph (1)(A) (i) and (ii) 
                for a taxable year over the amount of interest expense 
                deducted under this subsection for the taxable year 
                shall be added to the limitation determined under 
                paragraph (1) for the next taxable year (determined 
                without regard to this subparagraph). No excess 
                limitation may be carried to more than 3 taxable years.
            ``(5) Election.--The election under paragraph (1)(C)(ii) 
        shall be made at such time and in such manner as the Secretary 
        may prescribe by regulations.
            ``(6) Regulations.--The Secretary shall prescribe such 
        regulations and other guidance as may be necessary to carry out 
        the purposes of this subsection, including regulations to--
                    ``(A) coordinate the application of this subsection 
                with other interest deductibility rules,
                    ``(B) define financial services entities,
                    ``(C) permit financial reporting groups to compute 
                the group's non-United States net interest expense 
                without making certain adjustments required under 
                United States income tax principles,
                    ``(D) provide for the treatment of pass-through 
                entities, and
                    ``(E) allow the use of financial statements 
                prepared under other countries' generally accepted 
                accounting principles in appropriate circumstances 
                where a financial reporting group does not prepare 
                financial statements under United States generally 
                accepted accounting principles or international 
                financial reporting standards.''.
    (b) Coordination With 163(j).--Section 163(j)(2)(A) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following 
flush sentence: ``This subsection shall not apply to any corporation 
which is a member of a financial reporting group to which subsection 
(n) applies.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.