March 5, 2021
Report on recent US international tax developments – 5 March 2021
The United States (US) Senate on 4 March voted to proceed to consideration of the budget reconciliation bill (H.R. 1319) reflecting President Biden’s US$1.9 trillion “American Rescue Plan” COVID-19 relief package. Following the vote, Senate Majority Leader Chuck Schumer offered a substitute amendment that included a number of changes to the House legislation. The bill continues to include repeal of the Internal Revenue Code Section 864(f) worldwide interest expense allocation election, however.
If, as expected, the Senate approves the COVID-19 relief package with changes from the House bill, a conference process to resolve differences may be necessary or, at the very least, another House vote will be required.
Treasury Secretary Janet Yellen on 26 February said during a virtual G20 finance ministers and central bank governors meeting that the US would no longer push for Pillar One of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) 2.0 project to be implemented on a safe harbor basis. Trump Administration Treasury Secretary Steven Mnuchin had insisted that Pillar One, addressing the allocation of multinational enterprise profits to market jurisdictions, be structured as a safe harbor. That position was generally opposed by US trading partners involved in the discussions.
Taking the US safe harbor proposal off the table is expected to be viewed as a major step forward in the global discussions. But negotiations will still require considerable work.
Speaking during an OECD webcast on 4 March, Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, was quoted as saying that with the new US position, the goal is for the Inclusive Framework on BEPS to meet in late June or early July to reach a consensus agreement on Pillar One and Pillar Two. If agreement is reached, it will be presented at the G20 finance ministers meeting on 9-10 July 2021. Saint-Amans indicated he does not expect any further Pillar discussion drafts.
The Treasury Department on 2 March announced that Jose Murillo had accepted the position of Deputy Assistant Secretary for International Tax Affairs in the Office of Tax Policy. Most recently, Murillo was the Director of the International Tax and Transaction Services practice in EY’s National Tax Department in Washington, DC.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC