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

August 25, 2021

US Senators detail international tax framework

On 25 August 2021, United States (US) Senate Finance Committee Chairman Ron Wyden and Senators Sherrod Brown and Mark Warner detailed the international tax framework they released in April, focused on changes to the 2017 Tax Cuts and Jobs Act’s provisions on global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII), and the base erosion and anti-abuse tax (BEAT). Newly released legislative text of the framework — the April release did not include legislative language — still leaves several policy options undetermined, including the GILTI tax rate and how the BEAT might be changed to incorporate aspects of the Biden Administration's Stop Harmful Inversions and Ending Low-Tax Developments (SHIELD) proposal. Comments are requested on the draft by 3 September.

Proposed GILTI changes would:

  • Repeal the exemption for qualified business asset investment (QBAI, which is intended to be roughly the value of offshore tangible assets)

  • Increase the GILTI rate by an unspecified amount

  • Use a "country-by-country" system for applying GILTI through dividing global income into two groups, low-tax and high-tax, with GILTI only applied to income from low-taxed jurisdictions, while income from high-tax jurisdictions would remain subject to tax until repatriated

High-tax income would mean an effective rate that is (after incorporating any foreign tax credit haircut) greater than the GILTI rate, and a tested loss would be treated as creating high-taxed income.

The summary of the bill said, "The drafters are considering the best way to address timing issues in the country-by-country high-tax exclusion. For example, how losses in one year may impact the tax on income in a succeeding year. Special rules dealing with timing should operate within the architecture of the high-tax exclusion described above, and retain the country-by-country purpose that prevents losses in one country from offsetting income in another."

The bill would apply the high-tax exclusion in GILTI to subpart F and to foreign branches, and to the extent that there is a foreign tax credit haircut in GILTI (stating a range between 0 — 20%), there would be a similar haircut in subpart F. Branches that have losses are not treated as creating high-tax foreign branch income (a distinction from tested losses within GILTI).

An incentive designed to onshore research and management jobs would provide that expenses for research and experimentation and for "stewardship" would be treated as 100% allocated to US source income if those activities are conducted in the US.

The effective date proposed would be for tax years beginning after date of enactment.

FDII changes would:

  • Repeal the exemption for QBAI

  • Replace FDII's "deemed intangible income" with a new metric, "domestic innovation income," which would be research and development and worker training expenses

  • Equalize the yet-to-be-determined FDII and GILTI rates

BEAT changes would follow the original framework's proposal to give domestic business credits under Section 38 full value and would establish a second-rate bracket applicable to "base erosion income," which is the amount of income added to taxable income under Section 59A(c)(1) to determine the modified taxable income. Regular taxable income, excluding base erosion income, would remain subject to the 10% rate in the BEAT equation. Importantly, a summary said, "The drafters are considering the best way to incorporate into the BEAT the purposes and policies of the Stop Harmful Inversions and Ending Low-Tax Developments (SHIELD) proposal put forth by the Biden administration."

Text and a summary are attached below.


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

Washington Council Ernst & Young, Washington, DC

Any member of the group, at +1 202 293 7474



International tax framework text

Section by section summary


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