Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘Section 163(j)’

US int’l developments

As 2019 year-end is quickly approaching, there are important items of legislation still pending, including the following:

  • US Tax Act (TCJA) technical corrections, including the ability to apply transition tax overpayments (several Republicans and Democrats have already agreed to sponsor a relevant bill), and CFC downward attribution rules
  • Tax extenders, including the important look-through rules for CFC’s, which expires at the end of this year
  • Additional tax treaties will be reviewed, following the recent ratification of Spain and Japan treaties with the US
  • Final BEAT regulations, with new proposed regulations in some areas
  • Section 163(j) rules for application to CFC’s
  • GILTI high-tax exclusions
  • Final foreign tax credit regulations
  • Section 245A dividends received deduction regulations
  • FDII and anti-hybrid regulations

The above items are important as stand-alone items, and represent a significant amount of regulations to absorb prior to year-end if they can be issued this year.

These changes may significantly impact the annual ETR of multinationals in the fourth quarter, as well as introduce new TCJA concepts into treaties and complex Limitation of Benefit (LOB) clauses therein.

The TCJA complexities, and interpretations thereto, continue this year and next, posing compliance and planning uncertainties going forward.

EY’s Global Tax Alert provided additional details, as referenced.

https://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_13_September_2019/$FILE/2019G_001146-19Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%2013%20Sept%202019.pdf

US Sec. 163(j): Proposed Reg’s to apply a look-through approach

The review of these regulations by the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) review is progressing, with over 500 pages of proposed regulations to be released publicly this week.

Lafayette G. “Chip” Harter III, Treasury deputy assistance secretary for international tax affairs, provided comments on Nov. 9 at the Federal Tax Conference sponsored by the University of Chicago Law School.

The business interest expense limitation, currently applied by many at the individual CFC level, would be determined on a look-through method, with net external interest calculated at the CFC group level and allocated to CFC’s, with a tiering-up approach.

The proposed Reg’s will be very complex and long, with over 500 additional pages of BEAT, FTC, etc. also to be issued later this month.

 

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