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December 17, 2021

Report on recent US international tax developments 17 December 2021

It would appear, based on press reports, that the proposed Build Back Better Act (BBBA) will not pass the Senate this year. In a written statement referring to the BBBA, the White House said: “We will advance this work together over the days and weeks ahead; [Senate Majority] Leader Schumer and I are determined to see the bill successfully on the floor as early as possible.” No new timeline or deadline has been offered as to when the Senate may take up the BBBA. 

Earlier, on 11 December, Senate Finance Committee Chair Ron Wyden released updated text of the Finance Committee's title of the Build Back Better Act. The updated text largely retains the international tax proposals from the version of the BBBA passed by the House but includes some significant technical changes to these rules. Among other things, consistent with the House bill, the committee proposal would implement a new 15% corporate alternative minimum tax based on book income for companies that report over US$1 billion in profits to shareholders. The latest proposal introduces new adjustments, however, for determining a taxpayer's adjusted financial statement income (the base to which the 15% rate would apply). Some other highlights in the committee’s proposed bill include the following:

  • The committee proposal retains the basic structure of Internal Revenue Code1 Section 163(n) from the House bill, limiting deductions for net interest expense of a specified domestic corporation (SDC) to 110% of its net interest expense multiplied by the allowable percentage. Unlike prior iterations of Section 163(n), however, the committee proposal would permit taxpayers to elect to alter how the SDC's allocable share of the international financial reporting group’s book net interest expense (a component of the allowable percentage) is computed.
  • The committee proposal also retains, with no substantive modifications, the House bill's overhaul of the global intangible low-taxed income (GILTI) rules that would, among other things, require a United States (US) shareholder to compute its GILTI amount on a country-by-country basis. It further retains the House bill's changes to the subpart F income regime to generally limit foreign base company sales and services income rules to transactions involving a US tax resident, directly or by way of a branch or pass-through entity.
  • In regard to dividends from a foreign corporation, the House bill would have limited the Section 245A deduction to dividends received from controlled foreign corporates (CFCs), whereas current law allows the deduction for dividends received from "specified 10%-owned foreign corporations" (STFCs). The committee proposal, in contrast, would allow a Section 245A deduction for dividends from STFCs that are not CFCs but would reduce the amount of that deduction from 100% of dividends received to 65% of dividends received.
  • In the foreign tax credit (FTC) area, the committee proposal retains, with limited technical corrections, the House bill's modifications to the FTC rules, including a country-by-country FTC limitation for each separate category, the repeal of the foreign branch category, a GILTI category carryforward, a limitation on the allocation of expenses to the GILTI category for purposes of the FTC limitation, and other changes.
  • And the committee retains the general Base Erosion and Anti-abuse framework of Section 59A of the House bill, but would further modify the provision as it relates to cost of goods sold and payments with respect to inventory.

An EY Global Tax Alert on these and other committee changes is available.

On the regulations front, the first portion of final FTC regulations have cleared the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA) and returned to Treasury for final review, according to the OIRA website. A Treasury official earlier was quoted as saying the Government hopes to release the regulatory package, which reportedly runs about 400 pages, before the end of the year. A second set of final FTC regulations are expected to be released sometime in 2022.

The OIRA website also indicates that OIRA received final regulations on interbank offered rates (IBORS) for review on 14 December. The final regulations provide guidance on the tax aspects of the phased elimination of IBORs in the US and abroad. The regulations will address whether changes to a debt instrument as a result of the elimination of the relevant IBOR is a Section 1001 realization event for federal tax purposes.

The OECD announced on its website that the OECD will be releasing the Global Anti-Base Erosion Model Rules under Pillar Two on 20 December. The eagerly anticipated model rules have been delayed and were originally set for release at the end of November.


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

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



  1. All “Section” references are to the Internal Revenue Code of 1986, and the regulations promulgated thereunder.

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