I 

113TH CONGRESS 

2D SESSION H. R. 5444 

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 

SEPTEMBER 10, 2014 

Mr. POCAN 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’’. 

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 


emcdonald on DSK67QTVN1PROD with BILLS
2 

•HR 5444 IH

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

2 the following: 

3 ‘‘(n) LIMITATION ON EXCESSIVE INTEREST OF MEM4 BERS OF FINANCIAL REPORTING GROUPS.— 

5 ‘‘(1) LIMITATION.— 

6 ‘‘(A) IN GENERAL.—If this subsection ap7 plies to any corporation for any taxable year, no 

8 deduction shall be allowed under this chapter 

9 for the taxable year for interest expense to the 

10 extent that such expense exceeds the sum of— 

11 ‘‘(i) the amount of interest on indebt12 edness of the corporation includible in the 

13 corporation’s gross income for the taxable 

14 year, plus 

15 ‘‘(ii) the corporation’s proportionate 

16 share of the financial reporting group’s net 

17 interest expense for the taxable year com18 puted under United States income tax 

19 principles. 

20 ‘‘(B) PROPORTIONATE SHARE OF NET IN21 TEREST EXPENSE.—For purposes of subpara22 graph (A)(ii)— 

23 ‘‘(i) IN GENERAL.—A corporation’s 

24 proportionate share of the financial report25 ing group’s net interest expense means the 


emcdonald on DSK67QTVN1PROD with BILLS
3 

•HR 5444 IH

1 amount equal to the percentage of the 

2 group’s net interest expense which bears 

3 the same percentage as the corporation’s 

4 earnings bears to the group’s earnings. 

5 ‘‘(ii) EARNINGS.—For purposes of 

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

7 earnings plus net interest expense, taxes, 

8 depreciation, and amortization. 

9 ‘‘(iii) DETERMINATIONS RELATING TO

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

11 earnings, net interest expense, taxes, de12 preciation, and amortization with respect 

13 to a financial reporting group shall be as 

14 reflected on the financial reporting group’s 

15 financial statements for the taxable year 

16 ending in the taxable year of the corpora17 tion. 

18 ‘‘(C) ALTERNATIVE DETERMINATION.—In 

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

20 ‘‘(i) a corporation fails to substantiate 

21 the corporation’s proportionate share of 

22 the financial reporting group’s net interest 

23 expense for a taxable year, or 

24 ‘‘(ii) a corporation so elects, 


emcdonald on DSK67QTVN1PROD with BILLS
4 

•HR 5444 IH

1 no deduction shall be allowed under this chap2 ter for the taxable year for interest expense to 

3 the extent that such expense exceeds 10 percent 

4 of the corporation’s adjusted taxable income (as 

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

6 ‘‘(2) CORPORATIONS TO WHICH SUBSECTION

7 APPLIES.— 

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

9 apply to any corporation for any taxable year if 

10 the corporation is a member of a financial re11 porting group. 

12 ‘‘(B) CERTAIN CORPORATIONS NOT IN13 CLUDED.—This subsection shall not apply to 

14 any corporation which— 

15 ‘‘(i) is a corporation predominantly 

16 engaged in the active conduct of a bank17 ing, financing, or similar business, or 

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

19 interest expense for the taxable year. 

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

21 purposes of subparagraph (A), the term ‘finan22 cial reporting group’ means a group that pre23 pares consolidated financial statements in ac24 cordance with United States generally accepted 

25 accounting principles, international financial reVerDate Mar 15 2010 00:20 Sep 12, 2014 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5444.IH H5444

emcdonald on DSK67QTVN1PROD with BILLS
5 

•HR 5444 IH

1 porting standards, or other method authorized 

2 by the Secretary of the Treasury under regula3 tions. Such term shall not include any corpora4 tion described in subparagraph (B)(i). 

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

6 subsection, all members of an expanded affili7 ated group (as defined in section 7874(c)(1)) 

8 shall be treated as 1 corporation. 

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

10 interest expense’ has the meaning given such term 

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

12 ‘‘(4) CARRYFORWARD.— 

13 ‘‘(A) DISALLOWED INTEREST.—Any 

14 amount disallowed under subparagraph (A) or 

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

16 interest expense in the next taxable year, and 

17 such amount shall not be taken into account for 

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

19 such taxable year. 

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

21 any) of the sum determined under paragraph 

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

23 amount of interest expense deducted under this 

24 subsection for the taxable year shall be added 

25 to the limitation determined under paragraph 


emcdonald on DSK67QTVN1PROD with BILLS
6 

•HR 5444 IH

1 (1) for the next taxable year (determined with2 out regard to this subparagraph). No excess 

3 limitation may be carried to more than 3 tax4 able years. 

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

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

7 manner as the Secretary may prescribe by regula8 tions. 

9 ‘‘(6) REGULATIONS.—The Secretary shall pre10 scribe such regulations and other guidance as may 

11 be necessary to carry out the purposes of this sub12 section, including regulations to— 

13 ‘‘(A) coordinate the application of this sub14 section with other interest deductibility rules, 

15 ‘‘(B) define financial services entities, 

16 ‘‘(C) permit financial reporting groups to 

17 compute the group’s non-United States net in18 terest expense without making certain adjust19 ments required under United States income tax 

20 principles, 

21 ‘‘(D) provide for the treatment of pass22 through entities, and 

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

24 prepared under other countries’ generally ac25 cepted accounting principles in appropriate cirVerDate Mar 15 2010 00:20 Sep 12, 2014 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5444.IH H5444

emcdonald on DSK67QTVN1PROD with BILLS
7 

•HR 5444 IH

1 cumstances where a financial reporting group 

2 does not prepare financial statements under 

3 United States generally accepted accounting 

4 principles or international financial reporting 

5 standards.’’. 

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

7 163(j)(2)(A) of the Internal Revenue Code of 1986 is 

8 amended by adding at the end the following flush sen9 tence: ‘‘This subsection shall not apply to any corporation 

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

11 subsection (n) applies.’’. 

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

13 this section shall apply to taxable years beginning after 

14 December 31, 2014. 

Æ 


emcdonald on DSK67QTVN1PROD with BILLS