I 

115TH CONGRESS 

1ST SESSION H. R. 2057 

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

for excessive interest of members of financial reporting groups and to 

terminate the deferral of active income of controlled foreign corporations, 

and to amend the Securities Exchange Act of 1934 to require the 

disclosure of total corporate tax paid by a corporation in each annual 

report required to be filed under such Act, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 6, 2017 

Mr. POCAN (for himself, Ms. NORTON, Mr. CONYERS, Ms. MOORE, Ms. LEE, 

Ms. SCHAKOWSKY, Mr. CICILLINE, and Mr. GRIJALVA) introduced the 

following bill; which was referred to the Committee on Ways and Means, 

and in addition to the Committee on Financial Services, for a period to 

be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee 

concerned 

A BILL 

To amend the Internal Revenue Code of 1986 to limit the 

interest deduction for excessive interest of members of 

financial reporting groups and to terminate the deferral 

of active income of controlled foreign corporations, and 

to amend the Securities Exchange Act of 1934 to require 

the disclosure of total corporate tax paid by a corporation 

in each annual report required to be filed under such 

Act, and for other purposes. 


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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 ‘‘Tax Fairness and 

5 Transparency Act’’. 

6 SEC. 2. LIMITATION ON INTEREST DEDUCTION FOR EXCES7 SIVE INTEREST OF MEMBERS OF FINANCIAL 

8 REPORTING GROUPS. 

9 (a) IN GENERAL.—Section 163 of the Internal Rev10 enue Code of 1986 is amended by redesignating subsection 

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

12 the following: 

13 ‘‘(n) LIMITATION ON EXCESSIVE INTEREST OF MEM14 BERS OF FINANCIAL REPORTING GROUPS.— 

15 ‘‘(1) LIMITATION.— 

16 ‘‘(A) IN GENERAL.—If this subsection ap17 plies to any corporation for any taxable year, no 

18 deduction shall be allowed under this chapter 

19 for the taxable year for interest expense to the 

20 extent that such expense exceeds the sum of— 

21 ‘‘(i) the amount of interest on indebt22 edness of the corporation includible in the 

23 corporation’s gross income for the taxable 

24 year, plus 


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1 ‘‘(ii) the corporation’s proportionate 

2 share of the financial reporting group’s net 

3 interest expense for the taxable year com4 puted under United States income tax 

5 principles. 

6 ‘‘(B) PROPORTIONATE SHARE OF NET IN7 TEREST EXPENSE.—For purposes of subpara8 graph (A)(ii)— 

9 ‘‘(i) IN GENERAL.—A corporation’s 

10 proportionate share of the financial report11 ing group’s net interest expense means the 

12 amount equal to the percentage of the 

13 group’s net interest expense which bears 

14 the same percentage as the corporation’s 

15 earnings bears to the group’s earnings. 

16 ‘‘(ii) EARNINGS.—For purposes of 

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

18 earnings plus net interest expense, taxes, 

19 depreciation, and amortization. 

20 ‘‘(iii) DETERMINATIONS RELATING TO

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

22 earnings, net interest expense, taxes, de23 preciation, and amortization with respect 

24 to a financial reporting group shall be as 

25 reflected on the financial reporting group’s 


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1 financial statements for the taxable year 

2 ending in the taxable year of the corpora3 tion. 

4 ‘‘(C) ALTERNATIVE DETERMINATION.—In 

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

6 ‘‘(i) a corporation fails to substantiate 

7 the corporation’s proportionate share of 

8 the financial reporting group’s net interest 

9 expense for a taxable year, or 

10 ‘‘(ii) a corporation so elects, 

11 no deduction shall be allowed under this chap12 ter for the taxable year for interest expense to 

13 the extent that such expense exceeds 10 percent 

14 of the corporation’s adjusted taxable income (as 

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

16 ‘‘(2) CORPORATIONS TO WHICH SUBSECTION

17 APPLIES.— 

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

19 apply to any corporation for any taxable year if 

20 the corporation is a member of a financial re21 porting group. 

22 ‘‘(B) CERTAIN CORPORATIONS NOT IN23 CLUDED.—This subsection shall not apply to 

24 any corporation which— 


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1 ‘‘(i) is a corporation predominantly 

2 engaged in the active conduct of a bank3 ing, financing, or similar business, or 

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

5 interest expense for the taxable year. 

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

7 purposes of subparagraph (A), the term ‘finan8 cial reporting group’ means a group that pre9 pares consolidated financial statements in ac10 cordance with United States generally accepted 

11 accounting principles, international financial re12 porting standards, or other method authorized 

13 by the Secretary of the Treasury under regula14 tions. Such term shall not include any corpora15 tion described in subparagraph (B)(i). 

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

17 subsection, all members of an expanded affili18 ated group (as defined in section 7874(c)(1)) 

19 shall be treated as 1 corporation. 

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

21 interest expense’ has the meaning given such term 

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

23 ‘‘(4) CARRYFORWARD.— 

24 ‘‘(A) DISALLOWED INTEREST.—Any 

25 amount disallowed under subparagraph (A) or 


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

2 interest expense in the next taxable year, and 

3 such amount shall not be taken into account for 

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

5 such taxable year. 

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

7 any) of the sum determined under paragraph 

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

9 amount of interest expense deducted under this 

10 subsection for the taxable year shall be added 

11 to the limitation determined under paragraph 

12 (1) for the next taxable year (determined with13 out regard to this subparagraph). No excess 

14 limitation may be carried to more than 3 tax15 able years. 

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

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

18 manner as the Secretary may prescribe by regula19 tions. 

20 ‘‘(6) REGULATIONS.—The Secretary shall pre21 scribe such regulations and other guidance as may 

22 be necessary to carry out the purposes of this sub23 section, including regulations to— 

24 ‘‘(A) coordinate the application of this sub25 section with other interest deductibility rules, 


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1 ‘‘(B) define financial services entities, 

2 ‘‘(C) permit financial reporting groups to 

3 compute the group’s non-United States net in4 terest expense without making certain adjust5 ments required under United States income tax 

6 principles, 

7 ‘‘(D) provide for the treatment of pass8 through entities, and 

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

10 prepared under other countries’ generally ac11 cepted accounting principles in appropriate cir12 cumstances where a financial reporting group 

13 does not prepare financial statements under 

14 United States generally accepted accounting 

15 principles or international financial reporting 

16 standards.’’. 

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

18 163(j)(2)(A) of the Internal Revenue Code of 1986 is 

19 amended by adding at the end the following flush sen20 tence: ‘‘This subsection shall not apply to any corporation 

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

22 subsection (n) applies.’’. 

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

24 this section shall apply to taxable years beginning after 

25 December 31, 2017. 


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1 SEC. 3. TERMINATION OF DEFERRAL OF ACTIVE INCOME 

2 OF CONTROLLED FOREIGN CORPORATIONS. 

3 (a) IN GENERAL.—Section 952 of the Internal Rev4 enue Code of 1986 is amended by adding at the end the 

5 following new subsection: 

6 ‘‘(e) SPECIAL APPLICATION OF SUBPART.— 

7 ‘‘(1) IN GENERAL.—For taxable years begin8 ning after December 31, 2017, notwithstanding any 

9 other provision of this subpart, the term ‘subpart F 

10 income’ means, in the case of any controlled foreign 

11 corporation, the income of such corporation derived 

12 from any foreign country. 

13 ‘‘(2) APPLICABLE RULES.—Rules similar to the 

14 rules under the last sentence of subsection (a) and 

15 subsection (d) shall apply to this subsection.’’. 

16 (b) EFFECTIVE DATE.—The amendment made by 

17 subsection (a) shall apply to taxable years beginning after 

18 December 31, 2017. 

19 SEC. 4. REQUIREMENT TO DISCLOSE TOTAL CORPORATE 

20 TAXES PAID. 

21 (a) IN GENERAL.—Section 13 of the Securities Ex22 change Act of 1934 (15 U.S.C. 78m) is amended by add23 ing at the end the following new subsection: 

24 ‘‘(s) DISCLOSURE OF TOTAL CORPORATE TAXES

25 PAID.— 


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1 ‘‘(1) ISSUER DISCLOSURE REQUIREMENT.— 

2 Each issuer required to file an annual or quarterly 

3 report under subsection (a) shall disclose in that re4 port— 

5 ‘‘(A) the total pre-tax profit of the issuer 

6 during the period covered by the report; 

7 ‘‘(B) the total amount paid by the issuer 

8 in State taxes during the period covered by the 

9 report; 

10 ‘‘(C) the total amount paid by the issuer in 

11 Federal taxes during the period covered by the 

12 report; and 

13 ‘‘(D) the total amount paid by the issuer 

14 in foreign taxes during the period covered by 

15 the report. 

16 ‘‘(2) DISCLOSURE OF COUNTRY-BY-COUNTRY

17 REPORTING INFORMATION.—Each issuer required to 

18 file an annual or quarterly report under subsection 

19 (a) shall disclose in that report, for each of its sub20 sidiaries and aggregated on a country-by-country 

21 basis— 

22 ‘‘(A) revenues generated from transactions 

23 with other constituent entities; 

24 ‘‘(B) revenues not generated from trans25 actions with other constituent entities; 


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1 ‘‘(C) profit or loss before income tax; 

2 ‘‘(D) total income tax paid on a cash basis 

3 to all tax jurisdictions, and any taxes withheld 

4 on payments received by the constituent enti5 ties; 

6 ‘‘(E) total accrued tax expense recorded on 

7 taxable profits or losses, reflecting only oper8 ations in the relevant annual period and exclud9 ing deferred taxes or provisions for uncertain 

10 tax liabilities; 

11 ‘‘(F) stated capital, except that the stated 

12 capital of a permanent establishment must be 

13 reported in the tax jurisdiction of residence of 

14 the legal entity of which it is a permanent es15 tablishment unless there is a defined capital re16 quirement in the permanent establishment tax 

17 jurisdiction for regulatory purposes; 

18 ‘‘(G) total accumulated earnings, except 

19 that accumulated earnings of a permanent es20 tablishment must be reported by the legal entity 

21 of which it is a permanent establishment; 

22 ‘‘(H) total number of employees on a full23 time equivalent basis; and 

24 ‘‘(I) net book value of tangible assets, 

25 which, for purposes of this section, does not inVerDate Sep 11 2014 04:25 Apr 14, 2017 Jkt 069200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2057.IH H2057

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1 clude cash or cash equivalents, intangibles, or 

2 financial assets. 

3 ‘‘(3) AVAILABILITY OF INFORMATION.—The 

4 Commission shall make the information filed with 

5 the Commission pursuant to this subsection publicly 

6 available through the Commission website in a man7 ner that is searchable, sortable, and downloadable.’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to disclosures made after the date 

10 of the enactment of this Act. 

Æ 


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