Sander M. Levin (D-MI), the ranking member of the House Ways and Means Committee, released a discussion draft of the Stop Corporate Earnings Stripping Act of 2014, intended to complement the previously-introduced Stop Corporate Inversions Act of 2014 (H.R. 4679).  The draft bill seeks to reduce the incentives for US corporations to enter into inversion transactions by making three changes to existing law.  First, with respect to controlled foreign corporations (CFCs) that are members of an expanded affiliated group the common parent of which is not a US person, Section 956 would be expanded by subjecting to current taxation earnings that such CFCs invest in the stock or other obligations of non-CFC foreign affiliates.  Second, the deductibility of intercompany interest payments would be further restricted by (i) removing the debt-to-equity safe harbor of Section 163(j)(2); (ii) reducing from 50 percent to 25 percent the maximum amount a US entity's net interest paid to a related party can exceed its adjusted taxable income before it is considered a nondeductible excess interest expense; and (iii) limiting carryforwards of disallowed excess interest expenses to five years.  Finally, the discussion draft contains a placeholder for future provisions related to CFC de-control transactions.

The discussion draft is available via Tax Analysts’ document service (subscription required).  Rep. Levin’s office confirmed that it has not released an official version but is accepting comments on this version of the discussion draft.