I 

114TH CONGRESS 

1ST SESSION H. R. 3934 

To amend the Internal Revenue Code of 1986 to limit the interest deduction 

for excessive interest of members of financial reporting groups. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 5, 2015 

Mr. POCAN (for himself, Ms. NORTON, Mr. GARAMENDI, Ms. LEE, Mr. ELLISON, and Mr. NADLER) 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 limit the 

interest deduction for excessive interest of members of 

financial reporting groups. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Corporate Fair Share 

5 Tax Act’’. 


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1 SEC. 2. LIMITATION ON INTEREST DEDUCTION FOR EXCES2 SIVE INTEREST OF MEMBERS OF FINANCIAL 

3 REPORTING GROUPS. 

4 (a) IN GENERAL.—Section 163 of the Internal Rev5 enue Code of 1986 is amended by redesignating subsection 

6 (n) as subsection (o) and by inserting after subsection (m) 

7 the following: 

8 ‘‘(n) LIMITATION ON EXCESSIVE INTEREST OF MEM9 BERS OF FINANCIAL REPORTING GROUPS.— 

10 ‘‘(1) LIMITATION.— 

11 ‘‘(A) IN GENERAL.—If this subsection ap12 plies to any corporation for any taxable year, no 

13 deduction shall be allowed under this chapter 

14 for the taxable year for interest expense to the 

15 extent that such expense exceeds the sum of— 

16 ‘‘(i) the amount of interest on indebt17 edness of the corporation includible in the 

18 corporation’s gross income for the taxable 

19 year, plus 

20 ‘‘(ii) the corporation’s proportionate 

21 share of the financial reporting group’s net 

22 interest expense for the taxable year com23 puted under United States income tax 

24 principles. 


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1 ‘‘(B) PROPORTIONATE SHARE OF NET IN2 TEREST EXPENSE.—For purposes of subpara3 graph (A)(ii)— 

4 ‘‘(i) IN GENERAL.—A corporation’s 

5 proportionate share of the financial report6 ing group’s net interest expense means the 

7 amount equal to the percentage of the 

8 group’s net interest expense which bears 

9 the same percentage as the corporation’s 

10 earnings bears to the group’s earnings. 

11 ‘‘(ii) EARNINGS.—For purposes of 

12 clause (i), earnings shall be the sum of net 

13 earnings plus net interest expense, taxes, 

14 depreciation, and amortization. 

15 ‘‘(iii) DETERMINATIONS RELATING TO

16 EARNINGS.—For purposes of clause (ii), 

17 earnings, net interest expense, taxes, de18 preciation, and amortization with respect 

19 to a financial reporting group shall be as 

20 reflected on the financial reporting group’s 

21 financial statements for the taxable year 

22 ending in the taxable year of the corpora23 tion. 

24 ‘‘(C) ALTERNATIVE DETERMINATION.—In 

25 lieu of the limitation in subparagraph (A), if— 


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1 ‘‘(i) a corporation fails to substantiate 

2 the corporation’s proportionate share of 

3 the financial reporting group’s net interest 

4 expense for a taxable year, or 

5 ‘‘(ii) a corporation so elects, 

6 no deduction shall be allowed under this chap7 ter for the taxable year for interest expense to 

8 the extent that such expense exceeds 10 percent 

9 of the corporation’s adjusted taxable income (as 

10 defined under subsection (j)(6)(A)). 

11 ‘‘(2) CORPORATIONS TO WHICH SUBSECTION

12 APPLIES.— 

13 ‘‘(A) IN GENERAL.—This subsection shall 

14 apply to any corporation for any taxable year if 

15 the corporation is a member of a financial re16 porting group. 

17 ‘‘(B) CERTAIN CORPORATIONS NOT IN18 CLUDED.—This subsection shall not apply to 

19 any corporation which— 

20 ‘‘(i) is a corporation predominantly 

21 engaged in the active conduct of a bank22 ing, financing, or similar business, or 

23 ‘‘(ii) has less than $5,000,000 of net 

24 interest expense for the taxable year. 


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1 ‘‘(C) FINANCIAL REPORTING GROUP.—For 

2 purposes of subparagraph (A), the term ‘finan3 cial reporting group’ means a group that pre4 pares consolidated financial statements in ac5 cordance with United States generally accepted 

6 accounting principles, international financial re7 porting standards, or other method authorized 

8 by the Secretary of the Treasury under regula9 tions. Such term shall not include any corpora10 tion described in subparagraph (B)(i). 

11 ‘‘(D) SUBGROUPS.—For purposes of this 

12 subsection, all members of an expanded affili13 ated group (as defined in section 7874(c)(1)) 

14 shall be treated as 1 corporation. 

15 ‘‘(3) NET INTEREST EXPENSE.—The term ‘net 

16 interest expense’ has the meaning given such term 

17 by subsection (j)(6)(B). 

18 ‘‘(4) CARRYFORWARD.— 

19 ‘‘(A) DISALLOWED INTEREST.—Any 

20 amount disallowed under subparagraph (A) or 

21 (C) for any taxable year shall be treated as an 

22 interest expense in the next taxable year, and 

23 such amount shall not be taken into account for 

24 purposes of applying subsection (j)(2)(A)(ii) for 

25 such taxable year. 


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1 ‘‘(B) EXCESS LIMITATION.—The excess (if 

2 any) of the sum determined under paragraph 

3 (1)(A) (i) and (ii) for a taxable year over the 

4 amount of interest expense deducted under this 

5 subsection for the taxable year shall be added 

6 to the limitation determined under paragraph 

7 (1) for the next taxable year (determined with8 out regard to this subparagraph). No excess 

9 limitation may be carried to more than 3 tax10 able years. 

11 ‘‘(5) ELECTION.—The election under paragraph 

12 (1)(C)(ii) shall be made at such time and in such 

13 manner as the Secretary may prescribe by regula14 tions. 

15 ‘‘(6) REGULATIONS.—The Secretary shall pre16 scribe such regulations and other guidance as may 

17 be necessary to carry out the purposes of this sub18 section, including regulations to— 

19 ‘‘(A) coordinate the application of this sub20 section with other interest deductibility rules, 

21 ‘‘(B) define financial services entities, 

22 ‘‘(C) permit financial reporting groups to 

23 compute the group’s non-United States net in24 terest expense without making certain adjustVerDate Sep 11 2014 01:55 Nov 07, 2015 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3934.IH H3934

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1 ments required under United States income tax 

2 principles, 

3 ‘‘(D) provide for the treatment of pass4 through entities, and 

5 ‘‘(E) allow the use of financial statements 

6 prepared under other countries’ generally ac7 cepted accounting principles in appropriate cir8 cumstances where a financial reporting group 

9 does not prepare financial statements under 

10 United States generally accepted accounting 

11 principles or international financial reporting 

12 standards.’’. 

13 (b) COORDINATION WITH 163(j).—Section 

14 163(j)(2)(A) of the Internal Revenue Code of 1986 is 

15 amended by adding at the end the following flush sen16 tence: ‘‘This subsection shall not apply to any corporation 

17 which is a member of a financial reporting group to which 

18 subsection (n) applies.’’. 

19 (c) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to taxable years beginning after 

21 December 31, 2015. 

Æ 


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