Android - Unable to activate USB debugging after upgrading to Android 5.1.1

  1. Open settings and go to storage
  2. Press menu and go to USB Storage Mode
  3. Change to USB or MTP (NOT Charge only)
  4. Disable and re enable Development options with the 7 clicks on Build Number

storage settings USB Settings
Screenshots (click images for larger variants)

Removing 'persist.system.usb.config' file from data/property/ folder and restarting the device solved the issue for me.
After restart, the device shows the option to enable 'USB debugging'.

Root access is required to remove that file.