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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Stop Corporate Earn-
ings Stripping Act of 2016’’. 
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SEC. 2. PREVENTION OF EARNINGS STRIPPING OF COR-
PORATIONS WHICH ARE RELATED TO IN-
VERTED CORPORATIONS. 
(a) IN GENERAL.—Section 7874 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(g) as subsection (h) and by inserting after subsection (f) 
the following new subsection: 
‘‘(g) SPECIAL RULES APPLICABLE
TO EARNINGS 
STRIPPING AND RELATED PARTY TRANSACTIONS.— 
‘‘(1) IN GENERAL.—In the case of any corpora-
tion which is a related corporation for any taxable 
year, section 163(j) shall be applied with the fol-
lowing modifications: 
‘‘(A) 
5-YEAR
LIMITATION
ON 
CARRYFORWARD OF DISALLOWED AMOUNTS.— 
For purposes of determining any amount car-
ried to, or from, such taxable year under sub-
paragraph (B) of section 163(j)(1), such sub-
paragraph shall be applied by substituting ‘in 
the 1st succeeding taxable and in the 2nd 
through 5th succeeding taxable years to the ex-
tent disallowed under subparagraph (A) in the 
preceding taxable year (determined on a first- 
in, first-out basis and by treating the amount 
carried forward under this subparagraph as al-
lowed under subparagraph (A) before amounts 
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otherwise taken into account under subpara-
graph (A))’ for ‘in the succeeding taxable year’. 
‘‘(B) RULES FOR DETERMINING WHETHER 
INTEREST LIMITATION RULES APPLY.—In ap-
plying section 163(j)(2) to determine whether 
section 163(j) applies to such related corpora-
tion for such taxable year— 
‘‘(i) subparagraph (A)(ii) shall be dis-
regarded, and 
‘‘(ii) subparagraph (B)(i)(II) shall be 
applied by substituting ‘25 percent of the 
adjusted taxable income of the corporation’ 
for ‘the sum of 50 percent of the adjusted 
taxable income of the corporation plus any 
excess limitation carryforward under clause 
(ii)’ for purposes of determining the cor-
poration’s excess interest expense for such 
taxable year. 
‘‘(2) RELATED CORPORATION.—For purposes of 
this subsection— 
‘‘(A) IN GENERAL.—The term ‘related cor-
poration’ means any corporation for any taxable 
year if, at any time during such taxable year, 
such corporation is a member of an expanded 
affiliated group which includes (at any time 
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during such taxable year) an entity which is a 
surrogate foreign corporation, determined by 
applying subsection (a)(2)(B)— 
‘‘(i) by substituting ‘on or after May 
8, 2014’ for ‘after March 4, 2003’ in 
clause (i) thereof, 
‘‘(ii) by substituting ‘more than 50 
percent’ for ‘at least 60 percent’ in clause 
(ii) thereof, and 
‘‘(iii) by disregarding the matter fol-
lowing clause (iii) thereof. 
‘‘(B) EXCEPTION
FOR
INVERTED
COR-
PORATIONS TREATED AS DOMESTIC CORPORA-
TIONS.—Such term shall not include any cor-
poration if such corporation is treated as a do-
mestic corporation by reason of subsection (b). 
‘‘(C) SPECIAL
RULE
FOR
INCLUSION
OF 
NONCORPORATE
ENTITIES.—For purposes of 
subparagraph (A), a partnership or other entity 
(other than a corporation) shall be treated as a 
member of an expanded affiliated group if such 
entity controls (as determined under section 
954(d)(3)), or is controlled by (as so deter-
mined), members of such group (including any 
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entity treated as a member of such group by 
reason of this sentence).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to taxable years begin-
ning after the date of the enactment of this Act. 
Æ 
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