View
213
Download
0
Category
Preview:
Citation preview
NY12529:385927.2
Presentation to President’s Presentation to President’s Advisory Panel onAdvisory Panel on
Federal Tax Reform Federal Tax Reform
Presentation to President’s Presentation to President’s Advisory Panel onAdvisory Panel on
Federal Tax Reform Federal Tax Reform
International Provisions of the International Provisions of the Internal Revenue CodeInternal Revenue Code
March 31, 2005March 31, 2005
Willard Willard TaylorTaylor
2NY12529:385927.2
Outward and Inward Investment Outward and Inward Investment Outward and Inward Investment Outward and Inward Investment
In teaching international tax, it is In teaching international tax, it is common to deal separately with common to deal separately with “outward” and “inward” investment – “outward” and “inward” investment – that is, investment that is, investment fromfrom and and investment investment intointo the US the US
Export income (e.g., the DISC, FSC, ETI and domestic production rules) is generally thought of as a third category
Most of the debate – and complaints – Most of the debate – and complaints – relate to outward investmentrelate to outward investment
3NY12529:385927.2
What’s different?What’s different?What’s different?What’s different?
Witnesses on other subjects have Witnesses on other subjects have spoken about the complexity and other spoken about the complexity and other problems of the Codeproblems of the Code
What’s different in the case of What’s different in the case of “outward” investment from the US?“outward” investment from the US?
4NY12529:385927.2
What’s different? – cont’dWhat’s different? – cont’dWhat’s different? – cont’dWhat’s different? – cont’d
First, the growth of international trade and investment have made the US tax rules much more important than when they took shape in 1962
A creditor nation and a modest exporter of capital in 1962, the US is now a large capital exporter and importer and also the world’s largest debtor nation
5NY12529:385927.2
What’s different? – cont’dWhat’s different? – cont’dWhat’s different? – cont’dWhat’s different? – cont’d
Second, the different rhetoric and values that drive the debate on the taxation of foreign income
Not about fairness to US individuals and domestic economic efficiency, but
rightly or wrongly, framed as a choice between “capital export” and “capital import” neutrality* (and sometimes “national neutrality”**)
** Essentially, which country (residence or source) has the first claim Essentially, which country (residence or source) has the first claim to taxto tax
**** Foreign taxes treated as an operating expense, not a tax creditForeign taxes treated as an operating expense, not a tax credit
6NY12529:385927.2
What’s different? What’s different? – cont’d– cont’dWhat’s different? What’s different? – cont’d– cont’d
Third, the probable inability to achieve the goal of any system for taxing foreign income without some international con-sensus on the choice and on rates of tax, at least among major trading partners
7NY12529:385927.2
What’s different? What’s different? – cont’d– cont’dWhat’s different? What’s different? – cont’d– cont’d
The capital export/import neutrality The capital export/import neutrality debatedebate
Invokes issues of national competitiveness and world economic welfare
There are other systems in the world for There are other systems in the world for taxing foreign income taxing foreign income such as a such as a “territorial” (or exemption) system“territorial” (or exemption) system
In a pure territorial or exemption system, foreign income of domestic taxpayers is simply not taxed and no foreign tax credit is allowed
8NY12529:385927.2
What’s different? What’s different? – cont’d– cont’dWhat’s different? What’s different? – cont’d– cont’d
But choosing a different system would But choosing a different system would notnot
solve the complexity and other problems discussed hereafter or
significantly change the terms of the debate
9NY12529:385927.2
Where are we today?Where are we today?Where are we today?Where are we today?
General agreement that the inability to resolve General agreement that the inability to resolve competing arguments has resulted in a system competing arguments has resulted in a system for taxing the foreign income of US taxpayers for taxing the foreign income of US taxpayers that is*that is*
not “effective” or “administrable” “complex, easily avoided by the well advised and
a trap for the poorly advised” “schizophrenia in the tax system” with “rules
that lack coherence and often work at cross purposes”
“absurd [in its] level of complexity” a “jerry-rigged system”, and/or “a cumbersome creation of stupefying
complexity”
*In the words of practitioners and academics*In the words of practitioners and academics
10NY12529:385927.2
Where are we today? – cont’dWhere are we today? – cont’dWhere are we today? – cont’dWhere are we today? – cont’d
Remarkably, no consensus on the economic consequences of what we now have –
Does it or does it not make US-owned businesses less competitive than foreign-owned businesses?
Hard to believe that the present complexity does not make US business less competitive than it could be in the absence of the complexity
11NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment“outward” investmentEvolution of Code provisions on Evolution of Code provisions on “outward” investment“outward” investment
How did we get to where we are?How did we get to where we are? Started in 1954 with a system that, broadlyStarted in 1954 with a system that, broadly
deferred taxing earnings of US-owned foreign subsidiaries until repatriated
allowed a foreign tax credit for foreign income taxes on foreign income, but not in excess of the US tax on that income
A progression, from 1962 through 2004, of A progression, from 1962 through 2004, of ever more complicated limitations onever more complicated limitations on the deferral of tax, and the foreign tax credit
12NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – cont’d“outward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “outward” investment – cont’d“outward” investment – cont’d
Because of a concern that the 1954 Because of a concern that the 1954 Code unfairly favored foreign Code unfairly favored foreign investment by US persons over investment by US persons over domestic investment, domestic investment,
The 1962 Act limited the deferral of US tax on un-repatriated earnings of foreign subsidiaries
These limitations were expanded in the 1975, 1976 and 1986 Acts
13NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – cont’d“outward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “outward” investment – cont’d“outward” investment – cont’d
Because of a concern that the foreign tax Because of a concern that the foreign tax credit permitted the use of foreign taxes credit permitted the use of foreign taxes on one class of income against US tax on on one class of income against US tax on another, another,
The 1962 Act created a separate foreign tax credit “basket” for passive interest income – taxes on income in that basket could not be used against US tax on other income
More “baskets” were added in the 1975, 1976, 1984 and 1986 Acts
14NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – cont’d“outward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “outward” investment – cont’d“outward” investment – cont’d
Since the foreign tax credit is limited Since the foreign tax credit is limited to the US tax on foreign source to the US tax on foreign source taxabletaxable income, the foreign tax credit rules income, the foreign tax credit rules require an allocation of expensesrequire an allocation of expenses
Including, with modifications in 2004, interest expense incurred by US corporations
15NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – Sources of “outward” investment – Sources of complexitycomplexity
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – Sources of “outward” investment – Sources of complexitycomplexity
What were the sources of complexity resulting What were the sources of complexity resulting from the limitation on deferral? from the limitation on deferral?
Income of foreign subsidiaries that was not eligible for deferral had to be put in categories
Foreign personal holding company income – 1962 Foreign base company sales and services income –
1962 Income from insurance – 1962, 1986 and 1988 Oil related income – 1975 Shipping and aircraft income – 1975 Sales of property that did not produce active income –
1986 Income from commodities transactions – 1986 Income from foreign currency transactions – 1986 Income from a banking or similar business – 1986
16NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment “outward” investment – – Sources of Sources of complexity complexity – – cont’dcont’d
Evolution of Code provisions on Evolution of Code provisions on “outward” investment “outward” investment – – Sources of Sources of complexity complexity – – cont’dcont’d
What were the sources of complexity What were the sources of complexity resulting from the limitation on deferral?resulting from the limitation on deferral?
Host of special rules for Business rents and royalties
Income from sales or services outside of the foreign subsidiary’s country of incorporation
In-country related party dividends, interest, rents and royalties
Income from notional principal contracts
17NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment “outward” investment – – Sources of Sources of complexity complexity – – cont’dcont’d
Evolution of Code provisions on Evolution of Code provisions on “outward” investment “outward” investment – – Sources of Sources of complexity complexity – – cont’dcont’d
What were the sources of complexity in the What were the sources of complexity in the foreign tax credit changes? foreign tax credit changes?
Growth in separate “baskets” Passive interest income – 1962 Some dividend income – 1984 Foreign oil related income – 1975 All passive income – 1986 High withholding tax interest – 1986 Financial services income – 1986 Shipping and aircraft income – 1986 Dividends from certain non-controlled foreign
corporations – 1986
18NY12529:385927.2
Evolution of Code provisions on “outward” Evolution of Code provisions on “outward” investment investment – – Sources of complexity Sources of complexity –– cont’dcont’dEvolution of Code provisions on “outward” Evolution of Code provisions on “outward” investment investment – – Sources of complexity Sources of complexity –– cont’dcont’d
What were the sources of complexity What were the sources of complexity in the foreign tax credit changes?in the foreign tax credit changes?
In the “basket” system The need to identify taxes on specific types of
income
To separately allocate expenses to that income
To do this for taxes paid and expenses incurred through tiers of entities
To relate these calculations to income eligible/not eligible for deferral
19NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment “outward” investment – – Other Other provisionsprovisions
Evolution of Code provisions on Evolution of Code provisions on “outward” investment “outward” investment – – Other Other provisionsprovisions
Focusing on the foreign tax credit and the Focusing on the foreign tax credit and the anti-deferral rules should not diminish the anti-deferral rules should not diminish the importance of other legislative changes in importance of other legislative changes in the last 50-plus years – rules forthe last 50-plus years – rules for
International boycotts – 1976 Cross-border mergers and acquisitions –
principally, 1976 “Stapled” entities – 1984 Related party factoring income – 1984 “Passive foreign investment companies” – 1986 “Functional currency” and foreign exchange gain
or loss – 1986 Related party transfers of intangibles – 1986 “Dual consolidated losses” – 1986
20NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – Regulations, “outward” investment – Regulations, etc.etc.
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – Regulations, “outward” investment – Regulations, etc.etc.
In evaluating what has happened since In evaluating what has happened since 1962, need also to grasp that 1962, need also to grasp that Many statutory changes have since enact-
ment been further amended – in some cases, reversing the original legislative solution
Many of the statutory changes were followed by pages and pages of explanatory IRS regulations
The IRS on its own has issued significant regulations affecting outward investment
21NY12529:385927.2
Other developments – the check-the-Other developments – the check-the-box regulationsbox regulationsOther developments – the check-the-Other developments – the check-the-box regulationsbox regulations
One specific set of regulations deserves a One specific set of regulations deserves a comment -- the check-the-box regulationscomment -- the check-the-box regulations Provided the ability, for 1997 and later years, to
choose whether an entity would for tax purposes be a corporation, a branch or a partnership
A revolution for foreign operations of US taxpayers Simplified the task of reporting foreign income,
but Allowed the use of “hybrid”* branches to
undercut the anti-deferral rules
** An entity treated as a corporation for purposes of the foreign country’s tax law but not for US An entity treated as a corporation for purposes of the foreign country’s tax law but not for US tax purposestax purposes
22NY12529:385927.2
Evolution of Code provisions on “outward” Evolution of Code provisions on “outward” American investment – Jobs Creation Act of American investment – Jobs Creation Act of 20042004
Evolution of Code provisions on “outward” Evolution of Code provisions on “outward” American investment – Jobs Creation Act of American investment – Jobs Creation Act of 20042004
What ultimately became the American What ultimately became the American Jobs Creation Act of 2004 had the Jobs Creation Act of 2004 had the articulated objectives of simplification and articulated objectives of simplification and rolling back some of the anti-deferral rulesrolling back some of the anti-deferral rules
Some simplification but more than offset by the complexity of other newly-enacted rules
Did not even begin the process of addressing broad simplification or the development of coherent rules
Dropped the ball on corporate expatriations “earnings stripping” --- the deductibility of
interest paid to related foreign persons
24NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “inward” investment“inward” investmentEvolution of Code provisions on Evolution of Code provisions on “inward” investment“inward” investment
Rules on “inward” investment – Rules on “inward” investment – i.e., i.e., US invest-US invest-ment by foreign personsment by foreign persons Big change in US position since 1954 – now a
major importer of capital and the world’s largest debtor nation
Inward investment rules Do not reflect the debate on capital import/export
neutrality
Generally, lack a political constituency for reform
Have remained more constant than the outward investment rules, taking (again) the 1954 Code as a starting point
25NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’d
In 1954, and for many years prior thereto, the In 1954, and for many years prior thereto, the rules for taxing inward investment consisted of rules for taxing inward investment consisted of A flat 30% tax, collected by withholding at
source, on US “source” dividends, interest, royalties and like income of a foreign person that did not otherwise carry on business in the US
Tax at the regular individual or corporate rate on the US business income of foreign persons – that is, on income that was “effectively connected” with a US business
26NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’d
There was (and is) the rule that requires taxable There was (and is) the rule that requires taxable income from transactions between commonly-income from transactions between commonly-controlled corporations to reflect arm’s length controlled corporations to reflect arm’s length dealings*dealings* Of great importance, because “inward” invest-
ment typically is through foreign-owned US subsidiaries
Apart from the statutory “earnings stripping” rules, arm’s length pricing is the main rule that protects the US tax base from mispricing between US subsidiaries and their foreign affiliates
** Section 482 of the CodeSection 482 of the Code
27NY12529:385927.2
““Inward” investment – What are the Inward” investment – What are the problems? – cont’dproblems? – cont’d““Inward” investment – What are the Inward” investment – What are the problems? – cont’dproblems? – cont’d
What are the problems in the US taxation What are the problems in the US taxation of inward investment?of inward investment? Complexity – although possibly not to the
same extent as for outward investment
Specific rules that are neither administrable nor, as a practical matter, are in fact administered
Other rules that are out of date – e.g., they turn on physical presence in the US and the “source” of income
29NY12529:385927.2
Are there solutions? Are there solutions? Are there solutions? Are there solutions?
What are the issues with the way the Code What are the issues with the way the Code and regulations have evolved?and regulations have evolved?
General agreement that the subpart F and foreign tax credit rules are “stupefying” in their complexity and not administrable – the same could be said about some of the inward investment rules
No easy solution Changing to a territorial or exemption system
would neither simplify nor fundamentally change the terms of the debate
Nor are all of the 1962-2004 changes, however complex, “bad” and it would therefore be a mistake to simply go back to the 1954 Code
30NY12529:385927.2
Are there solutions? – cont’dAre there solutions? – cont’dAre there solutions? – cont’dAre there solutions? – cont’d
Like the system we now have, a territorial (or Like the system we now have, a territorial (or exemption) system would have to exemption) system would have to Classify income as foreign or domestic Distinguish between passive and active business
income Address how passive (or non-exempt) income
will be treated (e.g., no deferral and a foreign tax credit?)
Distinguish between partially and wholly-US owned foreign corporations
Allocate expenses between foreign and domestic, and passive and active business, income
Enforce arm’s length pricing among affiliates
31NY12529:385927.2
Are there solutions? – cont’dAre there solutions? – cont’dAre there solutions? – cont’dAre there solutions? – cont’d
A territorial system would also have toA territorial system would also have to Address foreign branches of US
corporations
Possibly distinguish between “good” and bad” foreign tax systems (and systems that are someplace in between)
Deal with the transition from the existing to the new system (e.g., what happens to untaxed retained earnings?)
32NY12529:385927.2
Are there solutions? – cont’dAre there solutions? – cont’dAre there solutions? – cont’dAre there solutions? – cont’d
Simplification is not possible without Simplification is not possible without In the case of outward investment, a serious
compromise between proponents of capital export and capital import neutrality
In the case of inward and outward investment, a serious intent to simplify for that reason alone
Need also to consider tax treaties and the Need also to consider tax treaties and the desirability of international consensusdesirability of international consensus
NY12529:385927.2
Appendix 1Appendix 1Appendix 1Appendix 1
Evolution of Code provisions Evolution of Code provisions on “outward” investmenton “outward” investment
34NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment“outward” investmentEvolution of Code provisions on Evolution of Code provisions on “outward” investment“outward” investment
How did we get to where we are?How did we get to where we are?
Historically, the US hasHistorically, the US has been a foreign tax credit country,
that deferred taxing foreign earnings of foreign subsidiaries until repatriated, and
classified corporations as foreign or not on the basis of where incorporated, not where managed or controlled
Not the only model in the world, but neither Not the only model in the world, but neither was the US model uncommon at the timewas the US model uncommon at the time
35NY12529:385927.2
1954 Code1954 Code1954 Code1954 Code
The 1954 Code rules on outward The 1954 Code rules on outward investment allowed a foreign tax credit for investment allowed a foreign tax credit for direct and “indirect”* foreign income taxesdirect and “indirect”* foreign income taxes Limited to the US tax on foreign source
income, calculated on a country-by-country basis
** Generally, a credit for foreign taxes paid by a foreign corporation on earnings Generally, a credit for foreign taxes paid by a foreign corporation on earnings distributed to a 10% or greater US corporate shareholder distributed to a 10% or greater US corporate shareholder
36NY12529:385927.2
1954 Code – cont’d1954 Code – cont’d1954 Code – cont’d1954 Code – cont’d
Earnings of US-owned foreign Earnings of US-owned foreign corporations were not taxed until corporations were not taxed until repatriated*repatriated*
Further, certain branches of US corporations could elect to be treated as foreign corporations
There was (and is) a general rule that There was (and is) a general rule that taxable income from transactions taxable income from transactions between commonly controlled between commonly controlled corporations, whether US or foreign, corporations, whether US or foreign, must reflect arm’s length terms**must reflect arm’s length terms**
** Other than passive income of foreign personal holding companiesOther than passive income of foreign personal holding companies
**** In Section 482 of the CodeIn Section 482 of the Code
37NY12529:385927.2
1954 Code – cont’d1954 Code – cont’d1954 Code – cont’d1954 Code – cont’d
““Special” provisions were essentially limited Special” provisions were essentially limited to Western Hemisphere Trade, China Trade Act to Western Hemisphere Trade, China Trade Act and “possessions” corporationsand “possessions” corporations
In effect, subsidies for operations in specific geographic areas
The basic rules had been unchanged for many The basic rules had been unchanged for many years years
In origin, the rules did not respond to any stated theoretical view – i.e., were not in response to any capital export/import neutrality debate
38NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1962 Act“outward” investment – the 1962 ActEvolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1962 Act“outward” investment – the 1962 Act
The Kennedy Administration thought that The Kennedy Administration thought that these rules unfairly favored foreign over these rules unfairly favored foreign over US investment US investment Sought in 1962 to end deferral for all of the
income of US-owned foreign corporations Not pure “capital export neutrality” because
of exceptions – would have retained deferral for earnings from less developed countries and also in part for income of export trade corporations
39NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1962 Act – “outward” investment – the 1962 Act – cont’dcont’d
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1962 Act – “outward” investment – the 1962 Act – cont’dcont’d
Got instead an end to deferral for so-Got instead an end to deferral for so-called “subpart F” income with back-up called “subpart F” income with back-up rules which treated rules which treated
untaxed earnings of a controlled foreign corporation as repatriated if used to make “investments in United States property”, and
gain from the sale of stock of a controlled foreign corporation as a dividend to the extent attributable to retained earnings
40NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1962 Act – “outward” investment – the 1962 Act – cont’dcont’d
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1962 Act – “outward” investment – the 1962 Act – cont’dcont’d
Thus, a combination of capital export Thus, a combination of capital export and capital import neutralityand capital import neutrality
Set the framework for the debate in the next 50-plus years about which system was the “better” one
Also put the Code distinctly on the path to complexity
41NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1962 Act – “outward” investment – the 1962 Act – cont’dcont’d
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1962 Act – “outward” investment – the 1962 Act – cont’dcont’d
What were the sources of complexity What were the sources of complexity resulting from the limitation on deferral? resulting from the limitation on deferral?
Income of foreign subsidiaries that was not eligible for deferral had to be put in categories –
Foreign personal holding company income Foreign base company sales and services income Income from insurance Oil related income Shipping and aircraft income A host of special rules for
business rents and royalties income from sales or services outside of the foreign
subsidiary’s country of incorporation income from a banking, financing or similar
business
42NY12529:385927.2
The 1962 Act also introduced a separate The 1962 Act also introduced a separate foreign tax credit “basket” for foreign foreign tax credit “basket” for foreign taxes on passive interest incometaxes on passive interest income
Idea was that the foreign tax credit limitation – which limits the credit to the US tax on foreign source taxable income – ought to be applied separately to each “basket” of income so that taxes on one basket of income could
not be used to offset US tax on another basket of income
or, colloquially, no “cross-crediting”
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1962 Act “outward” investment – the 1962 Act – cont’d– cont’d
43NY12529:385927.2
What were the sources of complexity in What were the sources of complexity in the 1975-1986 tax legislation?the 1975-1986 tax legislation?
In the “basket” system, the need to identify taxes on specific types of
income
to separately allocate expenses to that income
to do this for taxes paid and expenses incurred through tiers of entities
to relate these calculations to income eligible/not eligible for deferral
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1986 Act “outward” investment – the 1986 Act
44NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1986 Act – “outward” investment – the 1986 Act – cont’dcont’d
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1986 Act – “outward” investment – the 1986 Act – cont’dcont’d
What were the sources of complexity in What were the sources of complexity in the 1975-1986 tax legislation?the 1975-1986 tax legislation?
The further expansion of the categories of subpart F income to include, e.g.,
A much broader class of insurance income Banking, financing and similar income Foreign oil related income Commodities income Shipping income Foreign exchange gain
45NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1975 Act“outward” investment – the 1975 ActEvolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1975 Act“outward” investment – the 1975 Act
In 1975, special foreign tax credit rules were In 1975, special foreign tax credit rules were enacted for foreign oil and gas income – ultimatelyenacted for foreign oil and gas income – ultimately
Credits for taxes on “foreign oil and gas exploration income” were limited to the US tax rate
Credits for taxes on “foreign oil related income” were subject to a limitation that was comparable in intent but different
“Recapture” if foreign oil and gas extraction losses offset domestic income
Subpart F income expanded in 1975 to include Subpart F income expanded in 1975 to include foreign base company oil related income foreign base company shipping (including aircraft)
income
46NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1976 Act “outward” investment – the 1976 Act Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1976 Act “outward” investment – the 1976 Act
The 1976 Act further tightened up what had The 1976 Act further tightened up what had been started in 1962 – in 1976been started in 1962 – in 1976
No more deferral for earnings from less developed countries
Recapture of foreign losses used to offset domestic income
Capital gains rate differential taken into account in the foreign tax credit limitation
Repeal of the per country calculation of the limitation on foreign tax credit – henceforth, a worldwide calculation
47NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1984 Act“outward” investment – the 1984 ActEvolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1984 Act“outward” investment – the 1984 Act
The 1984 Act addedThe 1984 Act added A new foreign tax credit “basket” for
certain dividend income
A rule to prevent US source income from becoming foreign source when it was received by a US-owned foreign corporation and paid out to (or included in income by) US persons
48NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1986 Act“outward” investment – the 1986 ActEvolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1986 Act“outward” investment – the 1986 Act
To the separate “baskets” for interest, dividend To the separate “baskets” for interest, dividend and foreign oil and gas income, the 1986 Act added and foreign oil and gas income, the 1986 Act added 4 new baskets, in addition to an expanded “passive 4 new baskets, in addition to an expanded “passive income” basketincome” basket
High withholding tax interest, financial services income, shipping income and dividends from non-controlled Section 902 corporations In many cases with sub-baskets – e.g., export financing
income was excluded from high withholding tax interest and high-taxed income from passive income
The baskets were applied on a look-through basis to dividends, interest and other income from foreign subsidiaries
49NY12529:385927.2
The 1986 Act also rewrote the rules for The 1986 Act also rewrote the rules for determining foreign source taxable income, and determining foreign source taxable income, and thus the allowable foreign tax creditthus the allowable foreign tax credit Required an allocation of domestically-incurred
interest expense to determine foreign source taxable income Dramatically affected the foreign tax credit limitation The allocation reduced foreign source income by an
expense that was not deductible in the foreign country
Provided statutory rules (replacing 1977 regulations) for the apportionment of R & D expenses
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – the 1986 Act “outward” investment – the 1986 Act – cont’d– cont’d
50NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – 1986 Act – “outward” investment – 1986 Act – cont’dcont’d
1986 Act expanded Subpart F to include income from1986 Act expanded Subpart F to include income from insurance outside of the foreign corporation’s country of
incorporation
sales of property that did not produce active income
commodities transactions
foreign currency transactions
a banking or similar business
shipping, even though reinvested
In 1988, the insurance rules were amended again to apply In 1988, the insurance rules were amended again to apply subpart F to “related party insurance income” of a foreign subpart F to “related party insurance income” of a foreign insurance company owned to the extent of 25% or more insurance company owned to the extent of 25% or more by US shareholdersby US shareholders
51NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – Regulations“outward” investment – RegulationsEvolution of Code provisions on Evolution of Code provisions on “outward” investment – Regulations“outward” investment – Regulations
In evaluating what happened between 1962 In evaluating what happened between 1962 and 1986, need to grasp that and 1986, need to grasp that
Many of the statutory changes were followed by pages and pages of explanatory IRS regulations
Most of the statutory changes have since enactment been further amended (with exceptions, special rules and complex definitions), in some cases on a regular basis A number of the statutory changes (e.g., the
treatment for subpart F purposes of income from the conduct of a banking or similar business) reversed, then reversed again, the original legislative solution
52NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – Regulations – “outward” investment – Regulations – cont’dcont’d
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – Regulations – “outward” investment – Regulations – cont’dcont’d
Apart from the statutory changes, the IRS Apart from the statutory changes, the IRS independently issued extensive regulations independently issued extensive regulations on a number of major international subjects, on a number of major international subjects, including, e.g., including, e.g., In 1991, the definition of a creditable foreign
income tax
The standards for arm’s length pricing – in the ‘90s, the IRS embarked on a major and on-going effort to cover specific situations, such as transfers of tangible and intangible property
53NY12529:385927.2
Other developments – the check-the-Other developments – the check-the-box regulationsbox regulationsOther developments – the check-the-Other developments – the check-the-box regulationsbox regulations
For 1997 and later years, the classification of an For 1997 and later years, the classification of an entity as a corporation, a branch or a partnership entity as a corporation, a branch or a partnership became (under the check-the-box regulations) became (under the check-the-box regulations) largely electivelargely elective
The check-the-box regulations The check-the-box regulations Were a simplification for domestic entities, but a
revolution for foreign operations of US taxpayers
The ability to elect to treat foreign entities as The ability to elect to treat foreign entities as branches or as partnerships has vastly simplified the branches or as partnerships has vastly simplified the task of reporting foreign income, buttask of reporting foreign income, but IRS had not thought through the implications of the
check-the-box regulations on foreign operations
54NY12529:385927.2
Other developments – the check-the-box Other developments – the check-the-box regulations – cont’dregulations – cont’dOther developments – the check-the-box Other developments – the check-the-box regulations – cont’dregulations – cont’d
Elective classification permits Elective classification permits the use of “hybrid”* branches to eliminate
foreign tax and thus replicate the low-taxed foreign
income that subpart F was directed at
The IRS sought to address “hybrid” entities The IRS sought to address “hybrid” entities in the so-called hybrid branch payment rules, in the so-called hybrid branch payment rules, but Congress objected and these have not but Congress objected and these have not been adoptedbeen adopted
*An entity treated as a corporation for purposes of the foreign country’s tax law *An entity treated as a corporation for purposes of the foreign country’s tax law but not for US tax purposesbut not for US tax purposes
55NY12529:385927.2
Other developments – the check-the-box Other developments – the check-the-box regulations – cont’dregulations – cont’dOther developments – the check-the-box Other developments – the check-the-box regulations – cont’dregulations – cont’d
The check-the-box regulations also permit The check-the-box regulations also permit the separation of foreign taxes from the the separation of foreign taxes from the underlying foreign income, either throughunderlying foreign income, either through partnership allocations (which has been
addressed) and the use of reverse “hybrid” entities*
* An entity treated as a corporation for US tax purposes but as transparent for purposes of the foreign country’s tax law
56NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment “outward” investment – – cont’dcont’dEvolution of Code provisions on Evolution of Code provisions on “outward” investment “outward” investment – – cont’dcont’d
To focus on the foreign tax credit and subpart To focus on the foreign tax credit and subpart F is not to diminish the importance of other F is not to diminish the importance of other changes in the last 50-plus yearschanges in the last 50-plus years
The enactment in 1976 of the international boycott rules
Apart from reporting, disallow credits and end deferral and other benefits for income from boycott operations
The repeated changes, beginning largely in 1976, to the rules in Section 367
These govern the extent to which reorganizations and exchanges that are tax-free if purely domestic will be tax-free if a foreign corporation is involved
The 1984 enactment of Section 269B, relating to foreign corporations whose ownership is “stapled” to the ownership of a US corporation
57NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment “outward” investment – – cont’dcont’dEvolution of Code provisions on Evolution of Code provisions on “outward” investment “outward” investment – – cont’dcont’d
The 1984 rules that treat income from related The 1984 rules that treat income from related party factoring as interest received from a party factoring as interest received from a related party for subpart F and specified other related party for subpart F and specified other purposes purposes
The enactment in 1986 of the “passive foreign The enactment in 1986 of the “passive foreign investment company” rules investment company” rules
impose penalty taxes on US shareholders of broadly-defined “passive foreign investment companies” Co-existed until 2004 with foreign personal holding
company and foreign investment company rules
58NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “outward” investment – cont’d“outward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “outward” investment – cont’d“outward” investment – cont’d
The 1986 enactment of rules that establish a “functional currency” and thus foreign exchange gain or loss for non-functional currency transactions
The 1986 amendment which specified that the income from a related-party transfer of an intangible had to be “commensurate with” the income from the intangible
The 1986 prohibition on the use of a “dual consolidated loss” of a “dual resident corporation” to reduce the income of other members of a US consolidated group
59NY12529:385927.2
Evolution of Code provisions on “outward”Evolution of Code provisions on “outward”investment – American Jobs Creation Act of investment – American Jobs Creation Act of 20042004
Evolution of Code provisions on “outward”Evolution of Code provisions on “outward”investment – American Jobs Creation Act of investment – American Jobs Creation Act of 20042004
What ultimately became the American Jobs Creation What ultimately became the American Jobs Creation Act of 2004 had the articulated objective of Act of 2004 had the articulated objective of “reforming” subpart F and foreign tax credit rules – “reforming” subpart F and foreign tax credit rules – essentially targeting what had happened in 1986 essentially targeting what had happened in 1986 and rolling back some capital export neutrality rulesand rolling back some capital export neutrality rules
There was some simplificationThere was some simplification E.g., the elimination of some “baskets”, of the
foreign personal holding company and foreign investment company rules
But that simplification was more than offset by the But that simplification was more than offset by the complexity of other newly-enacted rules, such as complexity of other newly-enacted rules, such as the new elective interest allocation rulesthe new elective interest allocation rules
60NY12529:385927.2
Evolution of Code provisions on “outward” Evolution of Code provisions on “outward” invest-ment – American Jobs Creation Act of invest-ment – American Jobs Creation Act of 2004 – cont’d2004 – cont’d
Evolution of Code provisions on “outward” Evolution of Code provisions on “outward” invest-ment – American Jobs Creation Act of invest-ment – American Jobs Creation Act of 2004 – cont’d2004 – cont’d
The Act lacked balance and perspective – The Act lacked balance and perspective – did not comprehensively address, or even did not comprehensively address, or even begin the process of addressing, broad begin the process of addressing, broad simplification or the development of simplification or the development of coherent rules coherent rules
The provisions of the ActThe provisions of the Act were mostly borrowed from industry-
inspired wish lists, and what was ultimately included or not, and
its effective dates, responded to revenue projections and the lobbies’ influence
61NY12529:385927.2
Evolution of Code provisions on “outward” Evolution of Code provisions on “outward” invest-ment – American Jobs Creation Act of invest-ment – American Jobs Creation Act of 2004 – cont’d2004 – cont’d
Evolution of Code provisions on “outward” Evolution of Code provisions on “outward” invest-ment – American Jobs Creation Act of invest-ment – American Jobs Creation Act of 2004 – cont’d2004 – cont’d
Dropped the ball on Dropped the ball on the treatment of corporate inversions,
and
whether the earnings stripping rules needed revisions in order to achieve a different balance between the treatment of foreign and US-owned US corporations
63NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “inward” investment“inward” investment
Rules on “inward” investment – Rules on “inward” investment – i.e., i.e., US investment by foreign personsUS investment by foreign persons
Do not involve the capital export/import neutrality debate
Do not, with exceptions, have a political constituency for reform
Have remained more constant than the inward investment rules, taking (again) the 1954 Code as a starting point
64NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’d
In 1954, and for many years prior thereto, the In 1954, and for many years prior thereto, the rules for taxing “inward” investment consisted rules for taxing “inward” investment consisted of of A flat 30% tax, collected by withholding at source,
on US “source” dividends, interest, royalties and like income of a foreign person that did not otherwise carry on business in the US
Tax at the regular individual or corporate rate on the US business income of foreign persons – that is, on income that was “effectively connected” with a US business
65NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’d
There was (and is) the rule that requires taxable There was (and is) the rule that requires taxable income from transactions between commonly-income from transactions between commonly-controlled corporations to reflect arm’s length controlled corporations to reflect arm’s length dealings*dealings* Of great importance, because “inward” investment
typically is through foreign-owned US subsidiaries
Apart from the statutory “earnings stripping” rules, arm’s length pricing is the main rule that protects the US tax base from mispricing between US subsidiaries and their foreign affiliates
** Section 482 of the CodeSection 482 of the Code
66NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’d
The principal changes in the treatment of The principal changes in the treatment of “inward” investment since 1954 have been“inward” investment since 1954 have been
The 1966 enactment of rules which eliminated uncertainties about the tax consequences of, and thus encouraged, investment in US stocks, securities and commodities
The 1980 imposition of tax at regular rates on gain from a sale of an interest in US real estate
including an interest in a US corporation predominantly invested in such assets – the so-called “FIRPTA” tax
67NY12529:385927.2
The imposition in 1984 of withholding by a The imposition in 1984 of withholding by a purchaser of US real property as a means of purchaser of US real property as a means of collecting the FIRPTA taxcollecting the FIRPTA tax
The 1984 repeal of the 30% withholding tax The 1984 repeal of the 30% withholding tax on “portfolio” interest paid to unrelated on “portfolio” interest paid to unrelated foreign investors, foreign investors,
reflects the importance of permitting US borrowers to access foreign capital
The 1984 enactment of a statutory rule for The 1984 enactment of a statutory rule for determining when a non-citizen is a US determining when a non-citizen is a US resident and therefore subject to full US tax resident and therefore subject to full US tax
Evolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’d
68NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’d
The 1986 imposition of withholding tax on a The 1986 imposition of withholding tax on a foreign partner’s share of partnership foreign partner’s share of partnership income attributable to a US businessincome attributable to a US business
The 1986 enactment of “source” rules for The 1986 enactment of “source” rules for international communications and space international communications and space and ocean activity incomeand ocean activity income
The 1987 enactment of a statutorily The 1987 enactment of a statutorily mandated minimum rate of investment mandated minimum rate of investment return for foreign insurance companies return for foreign insurance companies doing business in the USdoing business in the US
69NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’d
The 1986 enactment of branch taxesThe 1986 enactment of branch taxes Repatriation of profits of a US branch
treated substantially as a dividend from a US subsidiary
Interest paid by a branch treated substantially as a payment of interest by a US subsidiary
70NY12529:385927.2
The 1986 revision to the rules for taxing The 1986 revision to the rules for taxing transportation income of foreign transportation income of foreign shipping and airline companiesshipping and airline companies
Limited the historical “equivalent exemption” rule to publicly traded companies or companies locally owned
Imposed a 4% excise tax on the gross US source transportation income of a company not eligible for the exemption to the extent the income is not taxable as income from a US business
Evolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’d
71NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’d
The 1989 enactment, and 1993 extension The 1989 enactment, and 1993 extension to guaranteed debt, of the “earnings to guaranteed debt, of the “earnings stripping rules”stripping rules” Disallow a current deduction for interest
paid to, or on debt guaranteed by, a related foreign person that would otherwise reduce taxable income by more than 50%
The 1993 enactment of anti-conduit rules The 1993 enactment of anti-conduit rules directed at avoidance of US withholding tax directed at avoidance of US withholding tax through the use of tax treaty provisionsthrough the use of tax treaty provisions
72NY12529:385927.2
Evolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’dEvolution of Code provisions on Evolution of Code provisions on “inward” investment – cont’d“inward” investment – cont’d
The 1996 enactment of rules on the The 1996 enactment of rules on the expatriation of individual taxpayersexpatriation of individual taxpayers
The 1997 enactment to deal with The 1997 enactment to deal with withholding on interest, dividend and withholding on interest, dividend and like payments to “hybrid” entitieslike payments to “hybrid” entities
73NY12529:385927.2
What are the problems in the US taxation of inward What are the problems in the US taxation of inward investment?investment?
Complexity -- although possibly not to the same Complexity -- although possibly not to the same extent as for outward investmentextent as for outward investment As in the case of outward investment, many of the
statutory amendments have been followed by pages and pages of IRS regulations
Other complex regulations have been initiated without legislative prompting -- e.g., those dealing with withholding at source on interest and dividends, and
with the taxation of US branches of foreign banks
“ “Inward” investment – What are the Inward” investment – What are the problems? – cont’dproblems? – cont’d
74NY12529:385927.2
“ “Inward” investment – What are the Inward” investment – What are the problems? – cont’dproblems? – cont’d “ “Inward” investment – What are the Inward” investment – What are the problems? – cont’dproblems? – cont’d
What are the problems?What are the problems? Many of the rules are neither administrable nor, as
a practical matter, are in fact administered E.g., the PFIC or FIRPTA rules
The rules for determining the taxability of increasingly important items of income are out of date – they turn on physical presence and “source” For example, income from e-commerce and in some
cases from derivatives
Residence-based sourcing does not work in a world with abundant tax havens
75NY12529:385927.2
“ “Inward” investment – What are the Inward” investment – What are the problems? – cont’dproblems? – cont’d “ “Inward” investment – What are the Inward” investment – What are the problems? – cont’dproblems? – cont’d
Rules for determining arm’s length Rules for determining arm’s length pricing for services, intangibles and pricing for services, intangibles and other items are not working well other items are not working well
the so-called advance pricing agreement program is not an answer
NY12529:385927.2
Appendix 3Appendix 3Appendix 3Appendix 3
DISCs, FSCs and Domestic DISCs, FSCs and Domestic ProductionProduction
77NY12529:385927.2
The DISC regime was enacted in 1971 The DISC regime was enacted in 1971 to permit deferral of export-related to permit deferral of export-related incomeincome
The DISC regime was enacted in 1971 The DISC regime was enacted in 1971 to permit deferral of export-related to permit deferral of export-related incomeincome
US has a history of providing tax benefits for exportsUS has a history of providing tax benefits for exports 1962 Act included special rules for “export trade
corporations” – whose qualification as such depended on US manufacture or production
In 1971, went further and enacted the DISC (“Domestic International Sales Corporation”) rules – a partial roll back of the anti-deferral measures in the 1962 Act A DISC is a U.S. corporation which devotes 95% of its
activities to exports, and Usually a “paper” corporation through which its US parent
channels exports Earnings not taxed until distributed GATT countries objected to DISCs because the deferral of
domestic tax had the effect of an export subsidiary
78NY12529:385927.2
In response to GATT objections, the In response to GATT objections, the US enacted the FSC provisions in 1984US enacted the FSC provisions in 1984In response to GATT objections, the In response to GATT objections, the US enacted the FSC provisions in 1984US enacted the FSC provisions in 1984
In 1984, deferral benefits of DISCS were ended In 1984, deferral benefits of DISCS were ended – an interest charge on deferred income– an interest charge on deferred income
Enacted FSC (“Foreign Sales Corporation”) Enacted FSC (“Foreign Sales Corporation”) provisions to respond to GATT rulings which provisions to respond to GATT rulings which approved of tax exemptions for activities approved of tax exemptions for activities “abroad”“abroad”
A foreign corporation owned by a U.S. exporter Allowed to contract with a related U.S. entity to
produce all of its products, thus substantially skirting the “abroad” requirement
”Rule of origin” required imported components to contribute no more than 50% of the exports’ fair market value
The WTO found the FSC regime to be an illegal The WTO found the FSC regime to be an illegal export subsidiaryexport subsidiary
79NY12529:385927.2
ETI was U.S.’s response to the WTO ETI was U.S.’s response to the WTO rulingrulingETI was U.S.’s response to the WTO ETI was U.S.’s response to the WTO rulingruling
In 2000, the ETI (“Extraterritorial Income”) In 2000, the ETI (“Extraterritorial Income”) legislation repealed the FSC provisions and legislation repealed the FSC provisions and exempted from tax qualifying foreign trade exempted from tax qualifying foreign trade income, which includedincome, which included
30% of foreign sales and leasing income
1.2% of foreign trading gross receipts
15% of foreign trade income
Like the FSC provision, ETILike the FSC provision, ETI Only exempted export income
Retained the 50% rule of origin
The WTO ruled the ETI regime to be illegal in 2002The WTO ruled the ETI regime to be illegal in 2002
80NY12529:385927.2
American Jobs Creation Act of 2004American Jobs Creation Act of 2004American Jobs Creation Act of 2004American Jobs Creation Act of 2004
The American Jobs Creation Act of The American Jobs Creation Act of 2004 responded by phasing-out the ETI 2004 responded by phasing-out the ETI system and phasing-in a reduced rate system and phasing-in a reduced rate of tax for income from qualified of tax for income from qualified domestic productiondomestic production
NY12529:385927.2
Appendix 4Appendix 4Appendix 4Appendix 4
US income tax treatiesUS income tax treaties
82NY12529:385927.2
US income tax treatiesUS income tax treatiesUS income tax treatiesUS income tax treaties
Treaties cut back on the reach of the Code by, Treaties cut back on the reach of the Code by, among other thingsamong other things
reducing the rates of US withholding tax on dividends, interest, royalties and like items
using a more restrictive “permanent establishment” test before business income is taxed
limiting the US tax on service income of individuals providing rules for foreign taxes eligible for credit
Treaties also provide a process for resolving Treaties also provide a process for resolving conflicting tax claims between taxing authoritiesconflicting tax claims between taxing authorities
83NY12529:385927.2
US income tax treaties – cont’dUS income tax treaties – cont’dUS income tax treaties – cont’dUS income tax treaties – cont’d
In 1954, the US had some 18 income tax treatiesIn 1954, the US had some 18 income tax treaties
There are now more than 60, and US negotiations There are now more than 60, and US negotiations now generally begin with a “model” treatynow generally begin with a “model” treaty
The spread of treaties can only be good, but US The spread of treaties can only be good, but US treaties have also become a separate body of treaties have also become a separate body of knowledgeknowledge
The terms differ materially, in part because entered into at different times
Limitation-on-benefit articles, which vary from treaty to treaty, are as complicated as any provision of the Code
NY12529:385927.2
Appendix 5Appendix 5Appendix 5Appendix 5
Some possible simplificationsSome possible simplifications
85NY12529:385927.2
Simplifications? Simplifications? Simplifications? Simplifications?
Eliminate provisions which are out-of-date or whose Eliminate provisions which are out-of-date or whose complexity cannot be justified, such as complexity cannot be justified, such as
Are foreign tax credit limitations on FOGEI and FORI needed, given the subsequent regulatory definition of creditable foreign taxes?
Would it be simpler to treat related party factoring income as interest for all tax purposes?
Are the “anti-conduit” regulations needed now that most US tax treaties have limitation on benefit articles?
Can the reach of the PFIC rules be justified? If “hybrid” entities erode subpart F, shouldn’t the
subpart F rules be revised to accept that? Or, if not, the check-the-box regulations changed?
86NY12529:385927.2
Simplifications – cont’dSimplifications – cont’dSimplifications – cont’dSimplifications – cont’d
Eliminate provisions which are out-of-date or whose Eliminate provisions which are out-of-date or whose complexity cannot be justified, including complexity cannot be justified, including
In light of the repeal of the withholding tax on “portfolio” interest, do the compliance rules imposed on banks and other intermediary holders of debt make sense?
If dividend flows can be replicated by derivatives, is there any point in imposing withholding tax on “portfolio” dividends?
In the case of a foreign and domestic corporation, do we need the stapled entities rule in Section 269B?
Can the Section 367 regulations on corporate “inversions” be eliminated now that Congress has addressed the subject in Section 7874?
With changes in securities markets, is the bank loan exception to the portfolio interest exemption still relevant?
87NY12529:385927.2
Simplifications? – cont’dSimplifications? – cont’dSimplifications? – cont’dSimplifications? – cont’d
Eliminate (or move elsewhere) provisions Eliminate (or move elsewhere) provisions whose purpose seems more driven by whose purpose seems more driven by ideology than sound tax policyideology than sound tax policy The FIRPTA tax on sales and dispositions of
US real property (and the related withholding tax)
The international boycott participation and related “bad” country rules
The rules relating to dual consolidated losses of dual resident entities
Recommended