Sec. 4302. Limitation on deduction of interest by domestic corporations which are members of an international financial reporting group
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Section 163 is amended by redesignating subsection
(n)as subsection
(p)and by inserting after subsection
(m)the following new subsection: In the case of any domestic corporation which is a member of any international financial reporting group, the deduction under this chapter for interest paid or accrued during the taxable year shall not exceed the sum of— the allowable percentage of 110 percent of the excess (if any) of — the amount of such interest so paid or accrued, over the amount described in subparagraph (B), plus the amount of interest includible in gross income of such corporation for such taxable year. For purposes of this subsection, the term international financial reporting group means, with respect to any reporting year, any group of entities which— includes— at least one foreign corporation engaged in a trade or business within the United States, or at least one domestic corporation and one foreign corporation, prepares consolidated financial statements with respect to such year, and reports in such statements average annual gross receipts (determined in the aggregate with respect to all entities which are part of such group) for the 3-reporting-year period ending with such reporting year in excess of $100,000,000. For purposes of subparagraph (A)(iii), rules similar to the rules of section 448(c)(3) shall apply. For purposes of this subsection— The term allowable percentage means, with respect to any domestic corporation for any taxable year, the ratio (expressed as a percentage and not greater than 100 percent) of— such corporation’s allocable share of the international financial reporting group’s reported net interest expense for the reporting year of such group which ends in or with such taxable year of such corporation, over such corporation’s reported net interest expense for such reporting year of such group. The term reported net interest expense means— with respect to any international financial reporting group for any reporting year, the excess of— the aggregate amount of interest expense reported in such group’s consolidated financial statements for such taxable year, over the aggregate amount of interest income reported in such group’s consolidated financial statements for such taxable year, and with respect to any domestic corporation for any reporting year, the excess of— the amount of interest expense of such corporation reported in the books and records of the international financial reporting group which are used in preparing such group’s consolidated financial statements for such taxable year, over the amount of interest income of such corporation reported in such books and records. With respect to any domestic corporation which is a member of any international financial reporting group, such corporation’s allocable share of such group’s reported net interest expense for any reporting year is the portion of such expense which bears the same ratio to such expense as— the EBITDA of such corporation for such reporting year, bears to the EBITDA of such group for such reporting year. The term EBITDA means, with respect to any reporting year, earnings before interest, taxes, depreciation, and amortization— as determined in the international financial reporting group’s consolidated financial statements for such year, or for purposes of subparagraph (A)(i), as determined in the books and records of the international financial reporting group which are used in preparing such statements if not determined in such statements. The EBITDA of any domestic corporation shall not fail to include the EBITDA of any entity which is disregarded for purposes of this chapter. The EBITDA of any domestic corporation shall be determined without regard to any distribution received by such corporation from any other member of the international financial reporting group. In the case of any international financial reporting group the EBITDA of which is zero or less, paragraph
(1)shall not apply to any member of such group the EBITDA of which is above zero. In the case of any group member the EBITDA of which is zero or less, paragraph
(1)shall be applied without regard to subparagraph
(A)thereof. For purposes of this subsection, the term consolidated financial statement means any consolidated financial statement described in paragraph (2)(A)(ii) if such statement is— a financial statement which is certified as being prepared in accordance with generally accepted accounting principles, international financial reporting standards, or any other comparable method of accounting identified by the Secretary, and which is— a 10-K (or successor form), or annual statement to shareholders, required to be filed with the United States Securities and Exchange Commission, an audited financial statement which is used for— credit purposes, reporting to shareholders, partners, or other proprietors, or to beneficiaries, or any other substantial nontax purpose, but only if there is no statement described in clause (i), or filed with any other Federal or State agency for nontax purposes, but only if there is no statement described in clause
(i)or (ii), or a financial statement which— is used for a purpose described in subclause (I), (II), or
(III)of subparagraph (A)(ii), or filed with any regulatory or governmental body (whether domestic or foreign) specified by the Secretary, but only if there is no statement described in subparagraph (A). For purposes of this subsection, the term reporting year means, with respect to any international financial reporting group, the year with respect to which the consolidated financial statements are prepared. Except as otherwise provided by the Secretary in paragraph (7), this subsection shall apply to any partnership which is a member of any international financial reporting group under rules similar to the rules of section 163(j)(3). Except as otherwise provided by the Secretary in paragraph (8), any deduction for interest paid or accrued by a foreign corporation engaged in a trade or business within the United States shall be limited in a manner consistent with the principles of this subsection. For purposes of this subsection, the members of any group that file (or are required to file) a consolidated return with respect to the tax imposed by chapter 1 for a taxable year shall be treated as a single corporation. The Secretary may issue such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection. . Section 163(o) is amended to read as follows: The amount of any interest not allowed as a deduction for any taxable year by reason of subsection (j)(1) or (n)(1) (whichever imposes the lower limitation with respect to such taxable year) shall be treated as interest (and as business interest for purposes of subsection (j)(1)) paid or accrued in the succeeding taxable year. Interest paid or accrued in any taxable year (determined without regard to the preceding sentence) shall not be carried past the 5th taxable year following such taxable year, determined by treating interest as allowed as a deduction on a first-in, first-out basis. . For rules related to the carryforward of disallowed interest in certain corporate acquisitions, see the amendments made by section 3301(c). The amendments made by this section shall apply to taxable years beginning after December 31, 2017.