Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

March 26, 2021

Report on recent US international tax developments 26 March 2021

The United States (US) Senate Finance Committee on 25 March held an international tax hearing that highlighted the opposing positions of congressional Democrats, who favor a dramatic overhaul of the international tax provisions in the Tax Cuts and Jobs Act (TCJA), and congressional Republicans and the business community. Democrats generally voiced support for raising revenue by changing the global intangible low-taxed income (GILTI) provisions, the base erosion and anti-abuse tax (BEAT), and the foreign derived intangible income (FDII) rules. Democratic witnesses made the case for international tax changes to fund priorities such as infrastructure and other proposals in President Joe Biden’s Build Back Better plan, and made the argument that the TCJA created incentives for US companies to move tangible assets and jobs outside the United States. Other witnesses and Republican committee members suggested there is no need to change the provisions.

The committee hearing underscored fundamental disagreement over US international tax policy. Finance Committee Chairman Ron Wyden made clear in his closing remarks that he has always supported tax reform that would tax the foreign earnings of US companies at the full US rate, while the TCJA represented an effort to move to a more territorial system in which the US largely does not tax the active foreign earnings of US global companies. The hearing also focused on whether FDII is indeed an effective export incentive, and whether the BEAT is doing enough to prevent erosion of the US tax base.

Ahead of the hearing, the staff of the Congressional Joint Committee on Taxation (JCT) released a document that discussed the legal and economic background of US taxation of cross-border activity, with particular attention on provisions newly enacted or substantially revised in the TCJA. In an opening statement at the international hearing, Chairman Wyden called the JCT report “jaw-dropping” for finding that the TCJA reduced the average US tax rate paid by the largest US corporations by more than half. (The JCT document also summarized international efforts to address tax challenges of the digitalization of the economy, and the implications for the United States.)

Chairman Wyden said that in the coming days, he along with Senators Sherrod Brown and Mark Warner will release a framework for international taxation that would reverse TCJA provisions for US-based multinationals who “must pay a fair share,” reward companies that invest and create good-paying jobs in the US, and stop rewarding companies that ship jobs and factories overseas.

On the international front, according to an initial list posted on the Organisation for Economic Co-operation and Development’s (OECD) website, the US Government and 18 other jurisdictions will participate in the Forum on Tax Administration’s (FTA) International Compliance Assurance Programme (ICAP). ICAP is a voluntary joint risk assessment initiative that is designed to stem the flow of issues into mutual agreement procedures. The OECD describes ICAP as providing “coordinated risk assessment of large MNE groups by tax administrations … using a group's Country-by-Country reports, master file, local files and other transfer pricing information.” The FTA in February 2021 released a new ICAP handbook that provides details regarding the program. A list of frequently asked questions for multinational enterprise groups is also available.

The Internal Revenue Service (IRS) this week released a practice unit (IRC 965 Transition Tax Overview) on the Internal Revenue Code Section 965 transition tax. Practice unit materials serve as job aids and training materials for IRS staff and provide helpful insight into how the IRS may interpret various areas of taxation. The practice unit materials are a great resource for a quick refresh on the provision and issues that may arise.


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

Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more