Senate Finance Committee Chairman Ron Wyden (D-OR), along with Senators Sherrod Brown (D-OH) and Mark Warner (D-VA), issued a discussion draft of legislative text detailing their previously released April 2021 international tax framework, which would amend the current rules on global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII), the Base Erosion and Anti-Abuse Tax (BEAT) and other rules.
While many practical and policy details remain to be determined, the proposals, if enacted would:
- Establish a mandatory country-by-country high-tax exclusion system for GILTI, subpart F, and foreign branch income
- Potentially extend the foreign tax credit haircut (currently applicable in the GILTI context) to the subpart F and foreign branch income contexts
- Require certain research and experimentation and stewardship expenses to be allocated to US-source income
- Modify the rules for determining BEAT liability such that certain "base erosion income" would be subject to a different, and higher, rate
- Leave open the possibility that certain (currently undefined) modifications to BEAT may be made to incorporate the purposes and policies of the Biden Administration's Stopping Harmful Inversions and Ending Low-Tax Developments (SHIELD) proposal
- Base the FDII regime on certain domestic innovation expenditures
The provisions are generally proposed to be effective for tax years beginning after the date of enactment with the notable exception of the modifications to FDII, for which no proposed effective date is provided.
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