Law Office of Charles W. Cope, PLLC | Tax Insights Blog | Base Erosion and Profit Shifting
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Tax Insights Blog
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Mr. Cope monitors the development of U.S. tax law daily through postings on government websites, daily tax publications, monthly tax journals, tax newsletters, tax conferences and meetings of professionals organizations in New York and Washington. Each month he publishes the Tax Insights Blog, which describes and analyzes significant U.S. tax developments (e.g., judicial decisions, regulations, proposed tax legislation) having cross-border tax consequences.  The blog's content should be of interest to U.S. businesses with foreign operations and businesses headquarted outside the United States with U.S. investments or U.S. operations.

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  • IRS Issues Proposed Regulations Implementing CbC Reporting
    December 2015

    On December 22, 2015, The Treasury and the IRS issued proposed regulations under section 6038 to implement the country-by-country (“CbC”) reporting template described in Action 13: Transfer Pricing Documentation and Reporting of the Base Erosion and Profit Shifting Project of the G20 and OECD (the “Action 13 Final Report”). At this time, the IRS has not issued a form to collect the information required by the proposed regulations.
     

     
  • Congressional Leaders Advise Treasury to Embrace BEPS With Caution
     
    June 2015
    On June 9, 2015, Senator Orrin Hatch, the chairman of the Senate Finance Committee, and Rep. Paul Ryan, the chairman of the House Ways and Means Committee, wrote to Jacob Lew, the Secretary of the U.S. Treasury, concerning U.S. involvement in the G-20 BEPS initiative (“BEPS”). Until recently, the U.S. Congress has shown little awareness of, or interest in, BEPS, but the Congress now appears to believe that BEPS may have an adverse effect on U.S. business and the U.S. fisc and is pressuring the Treasury to justify its participation in implementation of some of the BEPS recommendation
  • International Tax Reform Considered by Senate Finance Committee
    March 2015
    On March 17, 2015, the Senate Finance Committee held a two-hour hearing on reforming the provisions of the Internal Revenue Code dealing with the taxation of cross-border income. Four individuals testified at the hearing: Pam Olson an attorney with PricewaterhouseCoopers holding the title United States Deputy Tax Leader & Washington National Tax Services Leader, Anthony Smith, Vice President of Tax & Treasurer of Thermo Fisher Scientific Inc., Rosanne Altshuler, Professor of Economics and Dean of Social and Behavioral Sciences of Rutgers University, and Steve Shay, Professor of Practice of Harvard Law School. Olson and Shay have held senior positions in the Treasury’s Office of Tax Policy in the past. Although international tax reform has been discussed for year in Washington and no substantive legislation has been enacted, the current discussion may build a consensus that will lead to legislation, most likely after the next Presidential election in 2016.
     
    The materials prepared for the hearing and the hearing itself identified various factors providing an impetus for international tax reform in the United States as well as the policy issues to be addressed in crafting tax legislation to respond to those factors. Although the Senate Finance Committee has not yet drafted a legislative proposal, the questions asked by the senators during the hearing as well as their comments provide some insights as to the broad outlines of any bipartisan legislation that may follow.
  • Obama Administration’s Budget Addresses Some BEPS Action Items
     
    February 2015
    On February 2, 2015 the Obama administration released the description of the revenue proposals in its fiscal 2016 budget, commonly referred to as the “Green Book.”  From an international tax perspective, this year’s Green Book is notable because there are several new revenue proposals that align with action items under consideration by the OECD and the G20 as part of the BEPS (Base Erosion and Profit Shifting) initiative.  Below we discuss several of the Administration’s latest proposals in the context of the corresponding BEPS action items.
     
  • Representative Levin Releases Discussion Draft of Legislation to Limit Benefits of Corporate Inversions
     
    August 2014
    On July 31, 2014, Representative Sander Levin (Democrat, Michigan) released a discussion draft of legislation that, if enacted into law, would limit certain tax benefits that often flow from corporate inversions.  The legislation is known as the “Stop Corporate Earnings Stripping Act of 2014.” The discussion draft focuses on three areas: (i) tightening the “earnings stripping” rules of section 163(j), (ii) expanding the scope of section 956, and (iii) taxing the “decontrol” of a controlled foreign corporation.
     
  • U.S. Senate’s Hearing on Caterpillar Highlights U.S. Multinationals’ Tax Conundrum
    April 2014
    The U.S. Senate’s Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs (the “Subcommittee”) issued a report on April 1, 2104 entitled Caterpillar’s Offshore Tax Strategy (the “Report”). The Report is the result of an extensive inquiry by the Subcommittee’s members and staff, including a public hearing held on April 1, of a business restructuring implemented by Caterpillar beginning in 1999. The Report includes responses to the Subcommittee by Caterpillar, Caterpillar’s auditor, PWC, and expert reports and testimony. The Report, which runs 95 pages, is worth reading because it catalogs in some detail the issues that U.S. multinationals face when implementing a business restructuring that increases their offshore presence while deferring income that would otherwise be subject to current U.S. tax. The final part of this article addresses the tax conundrum that successful US companies, such as Caterpillar, face in today’s tax environment and how some have addressed it.
  • President Obama’s Budget Would Tighten U.S. Subpart F Rules
    March 2014
    On March 4, 2014, the Obama administration released its fiscal 2015 budget. The revenue proposals of the budget are contained in in a document commonly referred to as the Green Book. The 2015 Green Book, which contains 297 pages of proposed tax increases and tax expenditures, includes 17 international tax reform proposals that would significantly raise taxes on U.S. multinationals.  While the proposals are unlikely to garner much political support in the near future, some of them may enter into the mix of any political compromise needed to fund a revenue neutral reduction in the corporate tax rate – should serious corporate tax reform discussions materialize after the Congressional elections in the fall.
  • Senator Levin Reacts to BEPS
    September 2013
    In earlier posts we have discussed the activities of the Permanent Subcommittee on Investigations (the “Subcommittee”) of the U.S. Senate Homeland Security and Government Affairs Committee, which is chaired by Senator Carl Levin (Democrat, Michigan ), including the Subcommittee's hearings on tax planning carry out by various U.S. multinationals. We have also noted the ongoing work of the OECD and the G-20 countries in combating BEPS -- base erosion and profit shifting -- and mentioned the muted U.S. response to that effort so far. Senator Levin has proposed legislation to respond to BEPS.
  • U.S. Announces National Action Plan on Preventing the Misuse of Companies and Legal Arrangements
    June 2013
    On June 18, 2013 the Obama administration published the “U.S. National Action Plan on Preventing the Misuse of Companies and Legal Arrangements.” The purpose of the U.S. action plan is to combat the criminal misuse of business entities by enabling law enforcement and tax authorities enhanced access to beneficial ownership information of business entities.
  • U.S. Senate Subcommittee Holds Hearings Criticizing Apple’s Tax Planning
    May 2013
    On May 21, 2013, the Permanent Subcommittee on Investigations (the “Subcommittee”) of the U.S. Senate Homeland Security and Government Affairs Committee held a hearing that examined how Apple Inc. “has used a variety of offshore structures, arrangements, and transaction to shift billions of dollars in profits away from the United States and into Ireland, where Apple has negotiated a special corporate tax rate of less than two percent.” The hearing included testimony by Apple’s CEO, Tim Cook, the U.S. Treasury’s Assistant Secretary for Tax Policy, Mark Mazur, an IRS official responsible for transfer pricing enforcement, and others. The subcommittee and some of those testifying made specific recommendations for tax reform.