House Ways and Means Committee Chairman Kevin Brady said on 26 June that he does not see tax reform 2.0 as one bill. Rather, he suggested that a "phase 2" reform will be a package of "two, three, or four approaches," with permanency of temporary individual and small business provisions under the Tax Cuts and Jobs Act (TCJA) being one of them. The Chairman added that the House is aiming to send the best tax reform 2.0 package possible to the Senate, where Majority Leader Mitch McConnell and other Republicans will choose those areas they have the most interest in moving forward.

As for timing, Chairman Brady said he expects Ways and Means Committee Republicans to begin circulating a draft to House Republicans after the 4 July recess, then listening to concerns about what members want to see in the bill and incorporating changes into a legislative outline to be released in early August. Votes would follow in the fall, depending on when leadership wants to schedule them. The Senate Majority Leader meanwhile this week said that enactment of tax legislation this year would require the support of Senate Democrats, something that may be difficult to achieve.

The Internal Revenue Service (IRS) plans to issue new proposed rules this year for controlled foreign corporations' (CFCs) previously taxed income (PTI) that will address issues related to the TCJA's global intangible low-taxed income (GILTI) and Internal Revenue Code Section¹ 965 repatriation transition, according to a senior IRS official. According to the official, the IRS is considering two issues: how to allocate deductions at the CFC level against tested income, and how to deal with a GILTI inclusion without earnings and profits.

Regarding the Section 965 transition provision, the official was quoted as saying there is an open issue as to what PTI is accessed, which may have an impact on foreign exchange gain or loss when that PTI is repatriated.

In other news, the tax press is reporting that proposed regulations withdrawing the Section 385 debt-equity documentation rules (Reg. Section 1.385-2) were deposited with the Office of Management and Budget's (OMB) Office of Information and Regulatory Affairs on 21 June, and are officially "pending review." The withdrawal of the regulations was not unexpected; a Treasury official late last year said that the Government would withdraw the Reg. Section 1.385-2 documentation rules, and work on replacement regulations. According to those comments made by the Treasury official late last year, Treasury was planning to keep the rest of the Section 385 rules while Congress worked on tax reform that would address earnings-stripping and certain other issues.

The Organisation for Economic Co-operation and Development (OECD) Multilateral Convention (MLI or convention) will enter into force on 1 July 2018. According to a recent OECD press release, there are a total of 79 signatories to the convention covering 81 jurisdictions. The MLI's entry into force follows its ratification by five jurisdictions — Austria, the Isle of Man, Jersey, Poland and Slovenia. Three additional countries, Serbia, Sweden, and New Zealand, recently deposited their instrument of ratification with the organization. The convention will enter into force for those latter three jurisdictions on 1 October 2018.

In other OECD news this week, the organization announced the publication of stakeholder comments it received in response to a request for public comments on revisions to the OECD Transfer Pricing Guidelines relating to intragroup services and administrative approaches for resolving transfer pricing disputes.

The OECD also announced the launch of a comparable tax revenue database on 28 June, titled Global Revenue Statistics Database. The new database contains detailed, comparable tax revenue information covering 80 countries. It is meant to help policymakers develop and implement tax policy reforms.

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ENDNOTE

1. All "Section" references are to the Internal Revenue Code of 1986, and the regulations promulgated thereunder.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP, International Tax Services, Washington, DC

• Arlene Fitzpatrick
  arlene.fitzpatrick@ey.com
• Joshua Ruland
  joshua.ruland@ey.com