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February 26, 2021
Report on recent US international tax developments – 26 February 2021
The United States (US) House of Representatives on 26 February is expected to vote to approve President Biden’s US$1.9 trillion COVID relief plan. The “American Rescue Plan” will then go to the Senate for consideration where the legislation is expected to be amended and passage likely will require the support of all 50 Democrats, with Vice President Kamala Harris providing the tie-breaking vote.
Among other things, the package would provide direct payments, child tax credit expansion, earned income tax credit and child care tax credit enhancements, as well as an international tax change that would repeal the election for US affiliated groups to allocate interest expense on a worldwide basis beginning in 2021. Internal Revenue Code Section 864(f) was added to the tax code in 2004 but the provision had been deferred several times. Repeal of the worldwide interest allocation rules would raise roughly US$22 billion over 10 years, according to a Joint Committee on Taxation estimate.
The Senate Finance Committee this week held a confirmation hearing on the nomination of Adewale O. Adeyemo to be Treasury Deputy Secretary, during which he and committee members expressed a shared interest in working with the Organisation for Economic Co-operation and Development (OECD) on a multilateral approach to global taxation. Asked about the OECD multilateral discussions on Base Erosion and Profit Shifting (BEPS) 2.0 and digital services taxes, Adeyemo said the goal will be to protect US tax revenue and ensure that companies compete on a level playing field. The nominee echoed earlier statements by Treasury Secretary Janet Yellen that the Administration is ready to resume BEPS 2.0 discussions.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC