,,ii #aacth ,,congress #b;d ,session ,s4 #bghf ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,september #aj1 #bjad ,mr4 ,schumer 7for himself1 ,mr4 ,durbin1 ,mr4 ,brown1 ,mr4 ,coons1 ,mr4 ,rockefeller1 ,ms4 ,stabenow1 ,mr4 ,cardin1 ,mr4 ,reed1 ,mr4 ,menendez1 ,mr4 ,markey1 ,mr4 ,merkley1 ,ms4 ,baldwin1 ,mr4 ,levin1 and ,ms4 ,warren7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to prevent earnings stripping of domestic corporations which are members of a worldwide group of corporations which includes an inverted corporation and to require agreements with respect to certain related party transactions with those members4 #a4 ,short title ,this ,act may be cited as the ,corporate ,inverters ,earnings ,stripping ,reform ,act of #bjad4 #b4 ,additional rules related to inverted corporations 7a7 ,in general ,section #ghgd of the ,internal ,revenue ,code of #aihf is amended by redesignating subsection 7g7 as subsection 7h7 and by inserting after subsection 7f7 the following new subsection3 7g7 ,special rules applicable to earnings stripping and related party transactions 7#a7 ,modifications of limitation on interest deduction 7,a7 ,in general ,in the case of any additional limitation year of a corporation which is an applicable entity1 section #afc7;j7 shall be applied with the modifications described in subparagraph 7,b74 7,b7 ,modifications for additional limitation years ,for purposes of subparagraph 7,a71 the modifications described in this subparagraph are as follows3 7i7 ,no carryover ,no carryforward to any other taxable year shall be allowed under section #afc7;j77#a77;,b7 for interest paid or accrued during any additional limitation year with respect to which a deduction was disallowed to the corporation under section #afc7;j74 7ii7 ,rules for determining whether interest limitation rules apply ,in applying section #afc7;j77#b7 to determine whether section #afc7;j7 applies to the corporation for any additional limitation year-- 7,i7 subparagraph 7,a77ii7 shall be disregarded1 and 7,,ii7 subparagraph 7,b77i77,,ii7 shall be applied by substituting #be percent of the adjusted taxable income of the corporation for the sum of #ej percent of the adjusted taxable income of the corporation plus any excess limitation carryforward under clause 7ii7 for purposes of determining the corporation's excess interest expense for the year4 7,c7 ,additional limitation year ,for purposes of this paragraph1 the term additional limitation year means1 with respect to any corporation which is an applicable entity1 any taxable year beginning on or after the first day of the later of the corporation's-- 7i7 first taxable year beginning on or after the date of enactment of this subparagraph1 or 7ii7 first taxable year for which the corporation is an applicable entity4 7#b7 ,annual application for agreements on return positions 7,a7 ,in general ,each applicable entity shall file with the ,secretary an application for an approval agreement under subparagraph 7,c7 for each approval year4 ,such application shall be filed at such time and manner1 and shall contain such information1 as the ,secretary may prescribe4 7,b7 ,failures to comply ,if an applicable entity fails to file an application under subparagraph 7,a71 or the approval agreement does not contain the necessary provisions described in subparagraph 7,c71 for any taxable year1 then for such taxable year-- 7i7 there shall not be allowed any deduction1 or addition to basis or cost of goods sold1 for amounts paid or incurred1 or losses incurred1 by reason of a transaction between the entity and a foreign related person1 7ii7 any transfer or license of intangible property 7as defined in section #icf7;h77#c77;,b77 between the entity and a foreign related person shall be disregarded1 and 7iii7 any cost-sharing arrangement between the entity and a foreign related person shall be disregarded4 7,c7 ,approval agreement ,for purposes of subparagraph 7,a71 the term approval agreement means a prefiling1 advance pricing1 or other agreement specified by the ,secretary which contains such provisions as the ,secretary determines necessary to ensure that the requirements of sections #afc7;j71 #bfg7;a77#c71 #cfg1 #dhb1 and #hde1 and any other provision of this title applicable to transactions between related persons and specified by the ,secretary1 are met4 7,d7 ,approval year ,for purposes of this paragraph1 the term approval year means1 with respect to any applicable entity1 any taxable year beginning on or after the date of enactment of this subparagraph if such taxable year is within the #aj-taxable-year period beginning with the first taxable year for which the entity is an applicable entity4 7#c7 ,applicable entity ,for purposes of this subsection-- 7,a7 ,in general ,the term applicable entity means any corporation which is a member of an expanded affiliated group which includes an entity which-- 7i7 is a surrogate foreign corporation1 determined by applying subsection 7a77#b77;,b7-- 7,i7 by substituting more than #ej percent for at least #fj percent in clause 7ii7 thereof1 7,,ii7 by substituting before1 on1 or after for after in clause 7i7 thereof1 and 7,,iii7 by disregarding the matter following clause 7iii7 thereof1 and 7ii7 is not treated as a domestic corporation by reason of subsection 7b74 7,b7 ,special rule for inclusion of noncorporate entities ,for purposes of subparagraph 7,a71 a partnership or other entity 7other than a corporation7 shall be treated as a member of an expanded affiliated group if such entity controls 7as determined under section #ied7;d77#c771 or is controlled by 7as so determined71 members of such group 7including any entity treated as a member of such group by reason of this sentence74 4 7b7 ,effective date ,the amendments made by this section shall apply with respect to taxable years beginning after the date of enactment of this ,act4