International Tax Proposal included with 2015 Fiscal Year Budget Released to Congress

South Porch of the White HousePresident Barack Obama released his fiscal year 2015 budget request to Congress on Tuesday March 4, 2014 and lawmakers will promptly ignore it.

But the annual ritual highlights his policy priorities for the coming year and serves as a Democratic Party manifesto as Democrats seek to draw a contrast with Republicans ahead of congressional elections in November which include International Tax Proposals.

The administration wants new limits on overseas tax avoidance by corporations by seeking to prevent them from playing one country’s tax rules against anothers.

At the moment, big corporations must pay the top 35 percent corporate tax rate on foreign profits, but not until those profits are brought into the country.

Many lawmakers argue this structure encourages companies to make job-creating investments in foreign countries rather than in the United States.

The proposed reforms to the US International Tax System include (Detail of Proposal):

1. Defer Deduction of Interest Expense Related to Deferred Income of Foreign Subsidiaries

2. Determine the Foreign Tax Credit on a Pooling Basis

3. Tax Currently Excess Returns Associated with Transfers of Intangibles Offshore

4. Limit Shifting of Income Through Intangible Property Transfers

5. Disallow the Deduction for Excess Non-Taxed Reinsurance Premiums Paid to Affiliates

6. Restrict Deductions for Excessive Interest of Members of Financial Reporting Groups

7. Modify Tax Rules for Dual Capacity Taxpayers

8. Tax Gain from the Sale of a Partnership Interest on Look-Through Basis

9. Prevent Use of Leveraged Distributions from Related Corporations to Avoid Dividend Treatment

10. Extend Section 338(h)(16) to Certain Asset Acquisitions

11. Remove Foreign Taxes From a Section 902 Corporation’s Foreign Tax Pool When Earnings Are Eliminated

12. Create a New Category of Subpart F Income for Transactions Involving Digital Goods or Services

13. Prevent Avoidance of Foreign Base Company Sales Income through Manufacturing Services Arrangements

14. Restrict the Use of Hybrid Arrangements That Create Stateless Income

15. Limit the Application of Exceptions Under Subpart F for Certain Transactions That Use Reverse Hybrids to Create Stateless Income

16. Limit the Ability of Domestic Entities to Expatriate

Leave a Reply