Close
Close

International tax reform heats up

RFP
Tax Hot Topics
Tax Hot TopicsTop congressional lawmakers have ramped up discussions over international tax reform as the outlook for business and comprehensive reform has dimmed.

The president has flatly rejected individual rate cuts, and efforts toward business-only reform have flagged as the pass-through community has rejected most proposals that would leave it out of a corporate-only rate cut. In response, tax writers and congressional leadership have begun discussing whether international changes could be made as a “down payment” on broader reform.

Lawmakers continue to discuss whether a mandatory transition tax on unrepatriated offshore earnings at a reduced rate could be paired with a transportation bill to cover a highway funding gap. Both a stand-alone repatriation provision and a voluntary repatriation holiday remain unlikely, so lawmakers would also need to agree on a permanent shift to a more territorial tax system.

The Senate Finance Committee working group on international tax reform is also working on the idea of an intellectual property (IP) “box” that would tax income from patents and other IP at reduced rates. Senate Finance Committee Chair Orrin Hatch, R-Utah, extended the original May deadline for the tax reform working groups to allow them to keep working.

Despite the growing momentum, international-only reform still appears unlikely this year. Stark differences remain between Republicans and Democrats over how to structure potential rules on a minimum tax, anti-inversion rules or other base-erosion provisions. It also unclear how effective an IP box and a territorial tax system would be without any reduction in the top corporate rate. Republicans may also be unlikely in the end to use the money from a mandatory repatriation proposal on spending for highways rather than on other tax changes as part of reform.

Contact
Mel Schwarz
T +1 202 521 1564
E mel.schwarz@us.gt.com

Tax professional standards statement
This document supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the subject of this document, we encourage you to contact us or an independent tax adviser to discuss the potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this document may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this document is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.