I 

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. 

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 ‘‘Stop Corporate Earn5 ings Stripping Act of 2016’’. 


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1 SEC. 2. PREVENTION OF EARNINGS STRIPPING OF COR2 PORATIONS WHICH ARE RELATED TO IN3 VERTED CORPORATIONS. 

4 (a) IN GENERAL.—Section 7874 of the Internal Rev5 enue Code of 1986 is amended by redesignating subsection 

6 (g) as subsection (h) and by inserting after subsection (f) 

7 the following new subsection: 

8 ‘‘(g) SPECIAL RULES APPLICABLE TO EARNINGS

9 STRIPPING AND RELATED PARTY TRANSACTIONS.— 

10 ‘‘(1) IN GENERAL.—In the case of any corpora11 tion which is a related corporation for any taxable 

12 year, section 163(j) shall be applied with the fol13 lowing modifications: 

14 ‘‘(A) 5-YEAR LIMITATION ON

15 CARRYFORWARD OF DISALLOWED AMOUNTS.— 

16 For purposes of determining any amount car17 ried to, or from, such taxable year under sub18 paragraph (B) of section 163(j)(1), such sub19 paragraph shall be applied by substituting ‘in 

20 the 1st succeeding taxable and in the 2nd 

21 through 5th succeeding taxable years to the ex22 tent disallowed under subparagraph (A) in the 

23 preceding taxable year (determined on a first24 in, first-out basis and by treating the amount 

25 carried forward under this subparagraph as al26 lowed under subparagraph (A) before amounts 


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1 otherwise taken into account under subpara2 graph (A))’ for ‘in the succeeding taxable year’. 

3 ‘‘(B) RULES FOR DETERMINING WHETHER

4 INTEREST LIMITATION RULES APPLY.—In ap5 plying section 163(j)(2) to determine whether 

6 section 163(j) applies to such related corpora7 tion for such taxable year— 

8 ‘‘(i) subparagraph (A)(ii) shall be dis9 regarded, and 

10 ‘‘(ii) subparagraph (B)(i)(II) shall be 

11 applied by substituting ‘25 percent of the 

12 adjusted taxable income of the corporation’ 

13 for ‘the sum of 50 percent of the adjusted 

14 taxable income of the corporation plus any 

15 excess limitation carryforward under clause 

16 (ii)’ for purposes of determining the cor17 poration’s excess interest expense for such 

18 taxable year. 

19 ‘‘(2) RELATED CORPORATION.—For purposes of 

20 this subsection— 

21 ‘‘(A) IN GENERAL.—The term ‘related cor22 poration’ means any corporation for any taxable 

23 year if, at any time during such taxable year, 

24 such corporation is a member of an expanded 

25 affiliated group which includes (at any time 


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1 during such taxable year) an entity which is a 

2 surrogate foreign corporation, determined by 

3 applying subsection (a)(2)(B)— 

4 ‘‘(i) by substituting ‘on or after May 

5 8, 2014’ for ‘after March 4, 2003’ in 

6 clause (i) thereof, 

7 ‘‘(ii) by substituting ‘more than 50 

8 percent’ for ‘at least 60 percent’ in clause 

9 (ii) thereof, and 

10 ‘‘(iii) by disregarding the matter fol11 lowing clause (iii) thereof. 

12 ‘‘(B) EXCEPTION FOR INVERTED COR13 PORATIONS TREATED AS DOMESTIC CORPORA14 TIONS.—Such term shall not include any cor15 poration if such corporation is treated as a do16 mestic corporation by reason of subsection (b). 

17 ‘‘(C) SPECIAL RULE FOR INCLUSION OF

18 NONCORPORATE ENTITIES.—For purposes of 

19 subparagraph (A), a partnership or other entity 

20 (other than a corporation) shall be treated as a 

21 member of an expanded affiliated group if such 

22 entity controls (as determined under section 

23 954(d)(3)), or is controlled by (as so deter24 mined), members of such group (including any 


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1 entity treated as a member of such group by 

2 reason of this sentence).’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply with respect to taxable years begin5 ning after the date of the enactment of this Act. 

Æ 


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