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November 19, 2021
Report on recent US international tax developments – 19 November 2021
United States (US) President Joe Biden signed the long-awaited Infrastructure Investment and Jobs Act (H.R. 3684) into law on 15 November, following passage in the House on 12 November and by the Senate last summer.
Attention in the House this week turned back to the over US$1.6 trillion proposed Build Back Better Act (H.R. 5376) reconciliation bill, which the House passed on 19 November (220 to 213 vote), following numerous delays and missed deadlines. The House-passed Build Back Better Act (BBBA) includes significant changes to the international tax provisions of the Internal Revenue Code. These and other tax changes are generally intended to fund expanded social programs such as health coverage, affordable housing, universal pre-kindergarten and childcare, clean energy and climate investments, among other proposed spending provisions. Although largely consistent with the House Ways & Means Committee draft that was released on 13 September, the final House-passed BBBA contains many important changes to the proposed international tax provisions, such as updates to the effective dates to make proposals prospective only.
The BBBA now goes to the Senate, where consideration will begin after the Thanksgiving holiday and where it is expected to be modified. The House bill has already been shaped by the parameters set by Senators Joe Manchin and Kyrsten Sinema, reducing the size and scope of the bill and refocusing tax increases to pay for it away from rate increases and toward non-rate proposals such as a corporate minimum tax based on book income and a tax on stock buybacks, among other provisions. Senator Manchin earlier suggested that major changes are possible to the House version of the Build Back Better bill, saying: “They’re working off the House bill. That’s not going to be the bill I work off of.”
Senate Majority Leader Chuck Schumer has indicated that he wants the Build Back Better bill to be approved by the Senate before the Christmas break.
With respect to Internal Revenue Service (IRS) activity, on 15 November the IRS launched a new online tool that is designed to support US withholding agents’ compliance with reporting and withholding required with respect to IRS Form 1042-S (Foreign Person's U.S. Source Income Subject to Withholding). An IRS news release states that the tool performs a quality review of data before it is submitted to the IRS. An IRS tutorial is available on how to use the tool. According to the IRS, use of the tool is voluntary, “but the IRS will take into account a withholding agent's use of the tool when making enforcement and penalty determinations.”
Also, the IRS recently requested comments on Rev. Proc. 2015-41, which provides guidance on advance pricing and mutual agreement applications and compliance. Comments are due by 10 January 2022.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC