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

July 16, 2021
2021-5777

Report on recent US international tax developments 16 July 2021

Senate Budget Committee Democrats this week reached agreement on a top line US$3.5 trillion1 budget resolution with instructions, paving the way for a “human infrastructure” bill that will center on health care, climate, and caregiving. Under the plan, the bill would pass under the reconciliation process and would require the votes of all 50 Democratic senators (plus the Vice-President), to take place sometime after Congress returns from the August recess in September.

Describing what was agreed, Senate Majority Leader Chuck Schumer said: "Every major program that President Biden has asked us for is funded in a robust way." The Senate Finance Committee reportedly has been drafting tax provisions that would be used to pay for the legislation. There are four major areas for potential tax revenue-raisers under consideration: a corporate income tax increase and minimum tax, major international tax changes, increasing taxes on capital income, and individual tax increases targeting the wealthy.

The bipartisan group of Senators who negotiated the high-level $1 trillion infrastructure deal with President Joe Biden also met this week to try to nail down the details amid issues over the pay-fors for the plan, particularly the proposed $40 billion investment in the Internal Revenue Service to combat the tax gap. Senate Majority Leader Schumer on 15 July announced that the first vote on the bipartisan infrastructure package will take place on 21 July. The tight deadline, which Republicans described as strong-arming the process, is viewed as a strategy to force finalization of the bill. The Majority Leader also set a 21 July deadline for the Senate Democratic Caucus to agree on final numbers and a framework for the budget resolution.

United States (US) Treasury Secretary Janet Yellen this week was quoted as saying that Treasury is pushing Congress to include a global minimum tax in a budget reconciliation bill. The Treasury Secretary’s statement followed last week’s support by G20 Finance Ministers of the Inclusive Framework on Base Erosion and Profit Shifting’s (BEPS) high level agreement on a two-pillar solution to address the tax challenges arising from digitalization of the economy. The Biden Administration strongly supports a global minimum tax, which is the centerpiece of BEPS 2.0 Pillar Two.

Secretary Yellen said that Pillar One (addressing nexus and the allocation of profits) will be on a slightly slower track. She suggested that Pillar One may be “ready in the spring of 2022,” adding “we will try to determine at that point what's necessary for implementation.” Congressional action on Pillar One with regard to new taxing rights will likely require treaty ratification by a two-thirds vote in the Senate. Any deal would also likely require changes to the US effectively connected income rules.

______________________________________                                     

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

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

______________________________________

Endnotes

  1. Currency references in this Alert are to the US$.
 
 

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 © 2023, 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