International Tax Proposals Included in Build Back Better Act Create Additional Complexity for US multinationals

Neal Amendment Provisions Add Additional Complexity to the Taxation of US Multinationals

On September 15, 2021, Richard Neal, chairman of the House Ways and Means Committee, released details on proposed tax increases to help fund the $3.5 trillion “Build Back Better” budget reconciliation legislation currently under consideration in the House of Representatives.

Consistent with President Biden’s “Made in America” Tax Plan and Senator Wyden’s proposals, the Neal plan includes provisions designed to raise taxes on US Multinationals. Specifically, the Joint Committee on Taxation estimates that changes to the foreign tax credit calculation, the GILTI income exclusion, the FDII deduction, BEAT and Section 163(j) interest limitation will raise $335 billion.

Most commentators believe prospects for a tax bill before the end of 2021 remain strong. With respect to US taxation of multinationals, the Neal amendment includes many esoteric changes that would add a significant amount of complexity to an already highly-complex area of taxation.

The Neal Amendment proposes the following with respect to the taxation of US Multinationals:

  1. Foreign Tax Credit Modification Highlights – Applicable for Tax Years Beginning After December 31, 2021
  2. Global Intangible Low-Taxed Income and Subpart F Income Inclusion Modification Highlights - Applicable for Tax Years Beginning After December 31, 2021
  3. Section 250 Deduction Modification Highlights - Applicable for Tax Years Beginning After December 31, 2021
  4. Base Erosion and Anti-Abuse Tax Modification Highlights - Applicable for Tax Years Beginning After December 31, 2021
  5. Section 163(j) Interest Deduction Modification Highlights - Applicable for Tax Years Beginning After December 31, 2021
  6. Section 245A Dividend Received Deduction Modification Highlights - Applicable for Tax Years Beginning After December 31, 2021
  7. Other Notable International Tax Rule Modification Highlights - Applicable for Tax Years Beginning After December 31, 2021

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