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15 December 2017 Report on recent US international tax developments – 15 December 2017 US House and Senate conferees reached agreement on a final compromise tax reform package at mid-day on Friday (15 December). Negotiations to meld the House and Senate versions of the Tax Cuts and Jobs Act into a final reform bill continued through the week, including an open session that took place on 13 December. The final discussions addressed concerns by two Republican Senators to increase the child tax credit. Although a final tax reform deal has been struck, several Republican senators have yet to announce their support for the legislation. While details remain elusive pending release of the final Conference committee report, it is being widely reported that the final tax reform bill will reduce the corporate tax rate from 35% to 21% (the House and Senate bills provided a 20% CIT rate), and will eliminate the corporate alternative minimum tax (AMT). Negotiators reportedly have also agreed to reduce the pass-through deduction from the Senate-passed level of 23% to 20% because of an agreed-to cut in the top individual tax rate from 39.6% to 37%. The Conference report with final details on the tax reform bill may be released later today (15 December). Although the timetable for a vote has not been finalized, the current plan is for the Senate to vote on the final legislation ahead of the House, perhaps as early as 18 or 19 December; the House would then likely take up the bill the next day. The President has said he will sign the tax reform bill – the Administration's first major legislative victory since President Trump assumed office – before Christmas. Congress is scheduled to adjourn for the year on 22 December. The most important and far-reaching US tax legislation in over 30 years can be expected to generate an avalanche of Internal Revenue Service (IRS) guidance. An IRS official earlier in the month was quoted as saying that, assuming Congress passes tax reform, topping the list of guidance will be the transition tax on accumulated foreign earnings. The IRS official said, "The overall mechanics of Section 965 are relatively complicated" and the Government is aware of "quirks and potential double counting that will need to be addressed, one way or another." The official added that taxpayers may initially see IRS notices rather than regulatory guidance addressing the transition tax. And Finance Ministers from the five largest European Union economies recently weighed in on the US Congress' tax reform efforts, even before the legislation was finalized. In a joint letter sent to Treasury Secretary Steven Mnuchin on 11 December, the European officials warned that certain provisions in the proposed House and Senate tax reform bills may violate US tax treaties and trade rules. The letter was also sent to House and Senate tax leaders. A Treasury spokesperson said "We appreciate the views of the finance ministers." The IRS on 13 December announced that the United States and France had signed a joint statement providing for the spontaneous exchange of Country-by-Country (CbC) Reports filed with respect to fiscal years beginning in 2016. The statement is meant to save US multinationals with a constituent entity in France from having a local filing requirement in that country. More specifically, under the statement, US multinationals that file CbC reports for FY 2016 with the US that conform to the Base Erosion and Profit Shifting (BEPS) Action 13 Report requirements will not be subject to local filing obligations in France. Negotiations between the US and France on a CbC competent authority arrangement (CAA) for fiscal years beginning in 2017 reportedly are ongoing. A Treasury official recently said the IRS may not be able to complete all the bilateral CAAs that it has been working on by year end. Document ID: 2017-5039 |
