Comparison of Recent Tax Proposals - September 15, 2021 - Deloitte
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Comparison of Recent Tax Proposals September 15, 2021
Comparison of Recent Tax Proposals – International Tax Implications
Wyden/Brown/Warner House Ways and Means Committee – Build Back Better
Current Law FY22 President Biden
Overhauling International Taxation Act
(TCJA) “Green Book”
(Draft bill 08-25-2021) (Draft Bill 09-12-2021)
• Graduated rate structure:
18% on first $400,000 of income
21% on income up to $5 million
26.5% on income in excess of $5 million
28%
US Corporate • Graduated rates phase out when income exceeds $10
21% For fiscal-year taxpayers, first effective-year N/A million
Tax Rate
rate is blended • Blended rate for non-calendar tax year that includes
December 31, 2021
• Personal service corps taxed at flat 26.5% rate
• Section 243 DRD adjusted to hold constant the tax on
domestic dividends
• Increase rate to ̴16.5%; 37.5% section 250 deduction
“GILTI Tax Increase rate to 21% using a 25% section 250 Section 250 deduction rate is still
10.5% • Blended rate for non-calendar tax year that includes
Rate” deduction TBD, but likely 18%-19%*
December 31, 2021
*As reported by the New York Times
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 2Comparison of Recent Tax Proposals – International Tax Implications
Wyden/Brown/Warner
Current Law FY22 President Biden House Ways and Means Committee – Build Back Better Act
Overhauling International
(TCJA) “Green Book” (Draft Bill 09-12-2021)
Taxation (Draft bill 08-25-2021)
• Country-by-country calculation. A US Shareholder’s GILTI is the sum of
the amounts of GILTI determined separately with respect to each
• Mandatory high-tax exclusion
country in which any “CFC taxable unit” of the US shareholder is a tax
(HTE) determined based on ETR
resident.
of all tested units within the
same country that are part of a • Net CFC tested income, net DTIR, QBAI, and interest expense
foreign expanded group (i.e., determined on a country-by-country basis
Aggregate
GILTI not limited to CFC)
across all Per-country GILTI inclusion • Unclear if they intend to follow existing guidance under GILTI high-tax
Calculation
countries • One GILTI inclusion for all low- exclusion rules and/or repeal current high-tax exclusion rules
taxed tested income • Allocation of GILTI to CFCs for purposes of determining section 951A
• Effective for tax years of foreign PTEP under section 951A(f)(2) is done separately with respect to each
corporations that begin after CFC taxable unit
the date of enactment. • Section 250 taxable income limitation repealed; GILTI section 250
deduction can create and add to an NOL
• 5% FTC haircut; no haircut for FTCs from US possessions
• No elimination of 960(d)
haircut (up to 26.5% ETR • Tested foreign income taxes include taxes on tested losses
• FTC haircut between 0-20%
before considering • Taxes paid by foreign parent of US group may be allowed as FTC under
expenses) • Taxes paid by foreign parent of regs
GILTI FTCs US group may be allowed as FTC
20% • Taxes paid outside the • GILTI basket FTCs can be carried forward
(Section 960) under regs (to align with Pillar
controlled US group may
2) • Non-GILTI basket SLLs first reduce separate limitation income in non-
be allowed as FTC (to align
with Pillar 2) • No FTC carryforward GILTI baskets before reducing income in GILTI basket. (No similar
provision on ODLs)
• No FTC carryforward
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 3Comparison of Recent Tax Proposals – International Tax Implications
Wyden/Brown/Warner House Ways and Means Committee – Build Back
Current Law FY22 President Biden
Overhauling International Taxation Better Act
(TCJA) “Green Book”
(Draft Bill 08-25-2021) (Draft Bill 09-12-2021)
Exempts 10% return on Exempts 5% times QBAI; 10% of QBAI in US
GILTI QBAI Eliminated Eliminated
tangible asset basis possessions
• Losses of a tested unit can only be shared within the
same country
• If aggregate tested unit for a country has a tested
• Losses shared on loss, its income is considered high-tax tested
aggregate basis income
• No loss carryforward • No loss sharing • If aggregated tested unit for a country has a tested
across countries loss, its taxes are neither creditable nor deductible • Net CFC tested loss by country carries over to
Loss Sharing • Losses are considered
low-tax under final • No loss • Taxes at a tested loss tested unit may still be succeeding tax year for such country
GILTI HTE Regs and carryforward creditable, provided the tested loss offsets tested
high-tax under Prop. income of tested units within the same country, and
HTE Regs the country’s aggregate tested unit has positive
tested income that is not excluded by HTE.
• No requirement to have positive tested income at
the CFC under section 960(d) to claim FTCs
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 4Comparison of Recent Tax Proposals – International Tax Implications
FY22 President Wyden/Brown/Warner
Current Law House Ways and Means Committee – Build Back Better Act
Biden Overhauling International Taxation
(TCJA) (Draft Bill 09-12-2021)
“Green Book” (Draft Bill 08-25-2021)
Elective HTE for GILTI (final)
Repeal HTE for
High-Tax and elective unified HTE for Use of final GILTI HTE regulations as a Unclear if they intend to follow existing guidance under GILTI high-tax
subpart F and
Exclusion GILTI and subpart F framework for mandatory HTE exclusion rules and/or repeal current high-tax exclusion rules
GILTI
(proposed)
Apply FTC haircut between 0-20% on
FTC haircut on Only FTC haircut on taxes
N/A taxes imposed on distributions of N/A
PTEP imposed on 965 PTEP
GILTI and subpart F PTEP
• Mandatory HTE by country at US • Moves section 952(c)(3) to section 312(n) (E&P of CFC is
corporate tax rate determined without regard to LIFO inventory adjustments,
• Separate ETR test for general and installment sales, and completed contract method of accounting for
passive subpart F income all purposes)
• Taxed at US corporate tax • Losses of a tested unit can only be • Repeals branch rule for FBCSI (section 954(d)(2))
Subpart F rate N/A shared within the same country • For purposes of determining FBCSI and FBCSvI, the term “related
• No FTC haircut • If aggregate tested unit for a person” does not include any person unless such person is a taxable
country has a subpart F loss, its unit which is a tax resident of the US
income is considered high-tax • Revises definition of pro rata share, apparently retroactive to tax
tested income years of foreign corporations ending on or after December 31,
• FTC haircut between 0-20% 2017, to deal with mid-year dispositions of CFC stock
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 5Comparison of Recent Tax Proposals – International Tax Implications
Wyden/Brown/Warner House Ways and Means Committee – Build Back
Current Law FY22 President Biden
Overhauling International Taxation Better Act
(TCJA) “Green Book”
(Draft Bill 08-25-2021) (Draft Bill 09-12-2021)
• Mandatory HTE by country at US corporate tax rate
• As distinct from other HTEs, losses incurred by a
branch are permitted to offset other low-taxed foreign
Single FTC branch income in other countries
limitation for
Foreign branch Per-country foreign • If aggregated foreign branch for a country is high-taxed,
aggregated Foreign branch income basket repealed
income branch FTC limitation or has a loss, its taxes are neither creditable nor
foreign branch
deductible
income
• FTC haircut between 0-20%
• Amends definition of foreign branch to more closely
align with tested unit definition in GILTI HTE
• Eliminate 904(b)(4)
• R&D and stewardship expenses incurred in the US are • Repeal section 904(b)(4)
• 265(a) disallowance
directly allocated to US source income for FTC • No deductions other than section 250 deduction
Expense Section 861 of expenses
purposes allocated to GILTI basket
Allocation regulations allocable to exempt
income (e.g., 250 • Does not include 265(a) disallowance for interest • Does not include 265(a) disallowance for interest
deduction and expense expense
245A)
Mandatory
R&E
R&E Mandatory Mandatory R&E capitalization pushed back to tax years
capitalization N/A N/A
Capitalization beginning after December 31, 2025
beginning
1/1/2022
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 6Comparison of Recent Tax Proposals – International Tax Implications
Wyden/Brown/Warner
FY22 President
Current Law Overhauling International House Ways and Means Committee – Build Back Better Act
Biden
(TCJA) Taxation (Draft Bill 09-12-2021)
“Green Book”
(Draft Bill 08-25-2021)
• Per-country limitations under sections 904, 907, and 960
• Assigns each item of income and loss to a unique “taxable unit of the
taxpayer” which is a tax resident of a country (or, in the case of a branch,
has a taxable presence in such country). Taxable units of the taxpayer are:
1. The taxpayer
2. Each of its CFCs
• 10 year 3. Each interest held by taxpayer or any of its CFCs in a pass-through
N/A – see other
FTCs carryforward, 1 N/A – see other sections entity, if such pass-through entity is a tax resident of a country
sections
year carryback other than the country of the taxpayer or the CFC
4. Each branch the activities of which are carried on by the taxpayer
or any of its CFCs, and which give rise to a taxable presence in the
country where it is located.
• Alignment of OFL provisions with per-country determinations
• 5-year carryforward, no carryback, of taxes paid or accrued in tax years
beginning after December 31, 2021
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 7Comparison of Recent Tax Proposals – International Tax Implications
Wyden/Brown/Warner
FY22 President Biden Overhauling House Ways and Means Committee – Build Back Better Act
Current Law (TCJA)
“Green Book” International Taxation (Draft Bill 09-12-2021)
(Draft Bill 08-25-2021)
• Corporate min tax on
large taxpayers with
sufficient “base • Repeal and replace BEAT with SHIELD,
which denies 100% of the deductions • Increases BEAT rate to 12.5% for tax years beginning after 2023,
erosion percentage” • Retains BEAT
with respect to payments to related and to 15% for tax years beginning after 2025
(at least 2 or 3%,
depending on parties in low tax countries (by • Provides full value for • Provides full value for all credits including FTCs
industry) reference to agreed min tax rate at all general business
OECD, or, if such agreement is not in • Payments subject to U.S. tax or sufficient foreign tax are not base
credits (none for FTCs)
• Applies “BEAT rate” to place new GILTI rate), effective for tax erosion payments (BEPs). This includes (1) outbound payments
“modified taxable years beginning on or after 1/1/2023 • Applies 2 BEAT rates to a related party that are included in the computation of GILTI
income” (MTI) to MTI: a new higher or subpart F and (2) payments to a foreign related party if subject
• Payments to non-low taxed countries rate (yet to be to a foreign ETR ≥ the BEAT rate.
• Currently, BEAT rate is may be disallowed in part based on the determined) would
10 or 11% (depending aggregate ratio of the financial • COGS paid to foreign related parties that are “indirect costs”
BEAT apply to the excess of
on industry) reporting group’s low-taxed profits to capitalized in inventory under section 263A(a)(2)(B) treated as
MTI over taxable
its total profits, based on consolidated BEPs
• BEAT = excess of income, and the
financial statements. current rate would • Payments to foreign related party to acquire inventory generally
o BEAT rate × MTI,
• Reductions to gross income for COGS apply to the are BEPs to the extent they exceed the sum of (i) foreign related
over
for sales to related parties in low-tax remainder of MTI party’s direct costs plus (ii) costs the latter incurs to unrelated or
o regular tax countries (or to non low-tax members US parties, or that are otherwise subject to US income tax.
• Drafters considering
liability reduced of a financial reporting group if ETR is Taxpayer has the option to limit the BEP amount to the excess (if
how to incorporate
by all credits less than designated min rate) also any) over 120% of foreign related party’s direct costs
policy of SHIELD into
other than effectively eliminated by reducing other the BEAT • Base erosion percentage safe harbor repealed for tax years
certain of the allowable deductions, including those beginning after 2023
components of to unrelated parties
the section 38
credit
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 8Comparison of Recent Tax Proposals – International Tax Implications
Wyden/Brown/Warner House Ways and Means Committee – Build
FY22 President Biden
Current Law (TCJA) Overhauling International Taxation Back Better Act
“Green Book”
(Draft Bill 08-25-2021) (Draft Bill 09-12-2021)
• Eliminate QBAI offset to qualifying income
• Applies the same section 250 deduction rate
(to be determined) to both net CFC tested
income, and the foreign-derived ratio of • 21.875% deduction
deemed innovation income (“foreign-derived
• Section 250 taxable income limitation
innovation income”)
repealed; FDII deduction can create and add
• Deemed innovation income is the lesser of to an NOL
37.5% deduction (A) DEI and (B) the sum of [X]% qualified R&E
• Repeal FDII deduction • For tax years beginning after December 31,
FDII (13.125–21% effective and [X]% qualified training expenditures for
2017, DEI excludes
• Replace with [R&D incentives] activities conducted in the US
tax rate)
o FPHCI
• Determination of DEI and FDDEI remains
relevant for foreign-derived ratio o amounts included in gross income from a
QEF (under section 1293)
• If R&E expenditures must be amortized for
section 174 purposes, does not affect the o amounts eligible for the ETI exclusion
amount taken into account for deemed
innovation income purposes
• Effective date to be determined
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 9Comparison of Recent Tax Proposals – International Tax Implications
Wyden/Brown/Warner
Current Law FY22 President Biden Overhauling House Ways and Means Committee – Build Back Better Act
(TCJA) “Green Book” International Taxation (Draft Bill 09-12-2021)
(Draft Bill 08-25-2021)
• Would add a new interest deduction limitation applicable to domestic
• Would add an additional interest corporations part of groups with “disproportionate” leverage in the US
deduction limitation based on a
member’s proportionate share of • Appears to apply equally to US- and foreign-parented multinationals
the group’s EBITDA reflected on the • Provides for detailed rules, but as a rough approximation, the domestic corp’s
financial statements of a “financial deduction for net interest expense (NIE) is limited to:
reporting group.” (NIE of “International financial reporting group”) × (ratio of domestic corp’s
• Generally appears to be EBITDA to group’s EBIDTA) × 110%
inapplicable to US-parented
• Note actual formula contains book to tax translation
multinationals given treatment of a
163(j) “US subgroup” as a single • NIE and EBITDA determined by reference to amounts reported on group’s
Limits on
limitation of corporation that results in “applicable financial statement” as defined in section 451(b)(3)
Interest N/A
the US proportionate share of EBITDA • Applies to domestic corp. whose average NIE over a 3-year period exceeds $12
Deductions
Group being 100%. million (all domestic corps which are members of same international financial
• Appears to allow US members to reporting group treated as a single corp. for this purpose)
take into account EBITDA of CFCs. • Limitation does not apply to small business exempted under section 163(j)(3), S
• Applies the lesser of existing 163j corp, REIT, or RIC
limitation and financial reporting
• Eliminates partnership-level application of section 163(j)
group interest expense limitation
• Eliminates unlimited carryforward of interest expense disallowed by section
• Disallowed interest deductions are
163(j)
carried forward indefinitely
• Financial services entities exempt • Instead, carryforward of disallowed interest expense (based on smaller of
limitations under subsections (j) or (n) of section 163) limited to 5 years
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 10Comparison of Recent Tax Proposals – International Tax Implications
Wyden/Brown/Warner House Ways and Means
Current Law FY22 President Biden Overhauling International Committee – Build Back Better
(TCJA) “Green Book” Taxation Act
(Draft Bill 08-25-2021) (Draft Bill 09-12-2021)
Reduced deductions Disallow deductions for expenses paid or incurred in connection with
N/A N/A N/A
for Offshoring Jobs offshoring a US trade or business
Incentives for New general business credit equal to 10% of the eligible expenses paid
N/A N/A N/A
onshoring Jobs or incurred in connection with onshoring a US trade or business
• Min tax of 15% on worldwide pre-tax book income (reduced by
book NOLs) for companies with greater than $2B worldwide book
income
Book Income • Equals the excess of book tentative minimum tax over the regular
N/A N/A N/A
Minimum Tax tax liability. The book tentative minimum tax is reduced by general
business credits and FTCs.
• Book tax credit (if regular tax liability exceeds 15% book tax liability)
allowed as a carryforward
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 11Comparison of Recent Tax Proposals – International Tax Implications
Wyden/Brown/Warner House Ways and Means
FY22 President Biden Overhauling International Committee – Build Back Better
Current Law (TCJA)
“Green Book” Taxation Act
(Draft Bill 08-25-2021) (Draft Bill 09-12-2021)
Ownership Continuity:
• Amend 7874 to treat as a US company a foreign acquirer if
Ownership Continuity:
shareholder of 50% (from current 60%/80%).
• Different tax
Management and Control:
consequences
dependent upon • Amend 7874 to treat as a US company a foreign acquirer if: (i)
Corporate continuity (50-69%, immediately prior to acquisition FMV of US > FMV of Foreign To be considered in future N/A
Inversions 60-79%, and 80- Acquiring; (ii) primary management and control in the US; legislation
100%) and (iii) EAG does not conduct substantial business activities
in the country of foreign acquiring corporation
Management and
Control: Expand Scope of Acquisition to include substantially all the
assets of a trade or business of domestic corp or foreign
• N/A
partnerships and address distributions of stock.
Effective for transactions completed after date of enactment
Source and character of any gain
Source and character of any gain recognized in a disposition of a
Check-the-box rules recognized in a covered asset
Entity specified hybrid entity and to a change in entity classification is
permitted for non per disposition treated as from the
Classification treated as a sale or exchange of stock (without regard to section N/A
se entities under sale or exchange of stock (the
Elections 1248), effective for transactions occurring after the date of
section 7701 principles of section 338(h)(16)
enactment
apply)
• FOGEI expanded to include oil
Foreign oil and gas shale or tar sands
Fossil Fuels Repeal of GILTI exemption for FOGEI N/A
income taxed at 10.5% • FOGEI is included in the
definition of tested income
Unless otherwise stated, the effective date for each of these provisions is for tax-years beginning on or after 1/1/2022.
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 12Additional House Ways and Means Committee Provisions Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 13
Comparison of Recent Tax Proposals – International Tax Implications (Add’l Ways & Means Proposals)
House Ways and Means Committee – Build Back Better Act
(Draft Bill 09-12-2021)
Exemption for • Expands definition of “10% shareholder” to include any person that owns 10% or more of the total value of the stock of issuing corporation
Portfolio Interest • Effective for obligations issued after the date of enactment
• Deduction only applies to dividends from CFCs (rather than current law, which applies to specified 10-percent owned foreign corporations). Effective for
distributions made after the date of enactment.
• Authority extended for issuing regs related to:
• Treatment of US shareholders owning stock of a CFC through a partnership
Section 245A • Denial of the section 245A deduction for dividends received from foreign corporations out of E&P from dispositions to related parties which (1) are
not in the ordinary course of a trade or business and (2) are made on or after January 1, 2018, and during a tax year to which section 951A did not
apply
• Denial of the section 245A deduction for dividends received from foreign corporations in situations in which a transfer or issuance of stock on or after
January 1, 2018, results in a reduction in the US shareholder’s pro rata share of a CFC’s subpart F income or tested income
• Any “disqualified CFC dividend” treated as an extraordinary dividend without regard to the period the taxpayer held the stock to which such dividend relates.
Extraordinary “Disqualified CFC dividend” means any dividend paid by a CFC to a US shareholder attributable to E&P earned while foreign corporation was not a CFC or its
dividends stock was not owned by a US shareholder.
(section 1059)
• Applies to distributions made after the date of enactment
• Section 958(b)(4) (providing that section 318(a)(3)(A), (B), and (C) are not applied so as to consider a US person as owning stock which is owned by a person
who is not a US person in determining if a foreign corporation is a CFC) re-enacted retroactive to TJCA effective date
CFC definition • New section 951B subjects “foreign controlled US shareholders” to income inclusions under sections 951 and 951A from “foreign controlled foreign
corporations”
• New election available to treat a foreign corporation as a CFC if made by such foreign corporation and all US shareholders of such foreign corporation
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 14Comparison of Recent Tax Proposals – International Tax Implications (Add’l Ways & Means Proposals)
House Ways and Means Committee – Build Back Better Act
(Draft Bill 09-12-2021)
• Repeals 1-month deferral election in section 898(c)(2)
CFC tax years
• Applies for tax years of specified foreign corporations beginning after November 30, 2021
• Section 905(c)(1) is amended to require taxpayers to notify the Secretary for foreign tax redeterminations for “any other change in the amount, or treatment,
Foreign tax of taxes, which affects the taxpayer’s tax liability under this chapter.’’
redeterminations
• Effective 60 days after the date of the enactment of the Act
• Clarifies that amounts included in gross income under section 78 are treated as income in the same separate section 904 category as the related foreign taxes
deemed paid
Section 78 • Clarifies that any amount included in gross income under section 78 shall not be treated as a dividend
• Removes the section 78 gross-up attributable to deemed paid taxes under section 960(b) (related to taxes attributable to PTEP distributions)
• Effective for tax years beginning after December 31, 2017
Basis of upper-
• Modifies section 961(c) to provide that rules similar to the rules for basis adjustments under section 961(a) and (b) “shall apply” to the upper-tier CFC’s basis
tier CFC in stock
in any property of the upper-tier CFC, by reason of which the CFC’s US shareholder is considered as owning stock in a lower-tier CFC, as well as the upper-tier
of lower-tier CFC
CFC’s directly-owned stock in the lower-tier CFC or stock in any other CFC
(section 961(c))
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 15Comparison of Recent Tax Proposals – International Tax Implications (Add’l Ways & Means Proposals)
House Ways and Means Committee – Build Back Better Act
(Draft Bill 09-12-2021)
• Holding an interest in a DISC or FSC in an individual IRA that receives any commission or other payment from an entity owned by the individual for whose
benefit the IRA is established is a prohibited transaction for purposes of section 4975. This applies to stock and other interests acquired or held on or after
December 31, 2021.
DISC / FSC Rules
• Gains from the sale or exchange of DISC/FSC stock and distributions by a DISC/FSC to a foreign shareholder are treated as effectively connected with the
conduct of a trade or business conducted through a US permanent establishment “deemed to be had by” the shareholder. Applies to distributions after
December 31, 2021.
• Taxes paid or accrued by a dual capacity taxpayer to a foreign country are not considered a tax if the foreign country does not impose a generally applicable
income tax or to the extent the amount exceeds what would be paid or accrued under such generally applicable income tax if such taxpayer were not a dual
Dual capacity capacity taxpayer
taxpayers
• Dual capacity taxpayer means a person who is subject to a levy of a foreign country or possession and receives directly or indirectly a specific economic
benefit from such country or possession
• Amends section 361 to provide that a distributing corporation in a divisive reorganization recognizes gain to the extent of controlled corporation debt
Divisive securities transferred to the creditors of the distributing corporation in excess of the basis in assets (reduced by amounts paid by the controlled corporation
reorganizations to the distributing corporation) transferred from the distributing corporation to the controlled corporation in the transaction
(section 361)
• Applies to reorganizations after the date of enactment
Loss deferral on • Modifies section 267(f) to defer losses resulting from section 331 liquidations until the property of the liquidating entity is disposed of to persons who are
taxable not related
liquidations • Applies to losses after the date of enactment
Unless otherwise stated, the effective date for each of these provisions is for tax-years beginning on or after 1/1/2022.
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 16OECD Pillar 2 Blueprint Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 17
Comparison of Recent Tax Proposals – International Tax Implications
OECD Pillar 2 Blueprint
US Corporate Tax Rate N/A
“GILTI Tax Rate” Under negotiation
GILTI Calculation Country-by-country ETR test based on book income
GILTI FTCs (Section 960) N/A
GILTI QBAI Excludes from min tax calculation a fixed return for substantive activities with a payroll and a fixed asset component
• Losses can be shared on a country-by-country basis
• Indefinite carryforward
Loss Sharing
• Excess taxes in a jurisdiction create a credit to the extent of prior min-tax liability, which can offset liability in any jurisdiction.
• Other excess taxes may carryforward as a tax expense
High-Tax Exclusion N/A
FTC haircut on PTEP N/A
Subpart F N/A
Foreign Branch Income N/A
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 18Comparison of Recent Tax Proposals – International Tax Implications
OECD Pillar 2 Blueprint
Expense Allocation N/A
R&E Mandatory
N/A
Capitalization
Undertaxed Payments Rule (UTPR) applies to deny deductions based on payments to entities whose low-taxed income is not subject to Income
BEAT
Inclusion Rule (IIR)
FDII N/A
Financial Reporting Group
Interest Expense N/A
Limitation
Reduced deductions for
N/A
Offshoring Jobs
Incentives for onshoring
N/A
Jobs
Book Income Minimum N/A, but note that ETR is determined based on “covered taxes” imposed on book income (with some adjustments). Covered taxes include local income
Tax taxes, WHT, CFC tax, and taxes on dividend income
Corporate Inversions N/A
Entity Classification
N/A
Elections
Fossil Fuels N/A
FTCs N/A
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 19Wyden/Brown/Warner FDII Proposal Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 20
Comparison of Recent Tax Proposals – International Tax Implications
Wyden/Brown/Warner
Comparison Present Law Overhauling International Taxation
(Draft Bill 08-25-2021)
FDDEI 100 100
DEI 400 400
a
Foreign Derived Ratio 25% 25%a
DEI 400
DTIR (10% of QBAI) 50
Deemed Intangible Income 350b
R&E and Training Expenses 300
Qualifying R&E and Training % 80%*
Deemed Innovation Income 240b
FDII (a*b) 88 60
FDII Deduction 33 23
.
* For illustrative purposes only- the % has not been determined.
Observations:
• Taxpayers will have a larger/smaller FDII deduction based on the materiality of their R&E in relation to their DEI less 10% of QBAI
• All of the complexity in the present law calculation remains, with the exception of computing QBAI
• Taxpayers who couldn’t clear the QBAI hurdle under current law may now have a FDII benefit for the first time (the TI limitation still applies)
Copyright © 2021 Deloitte Development LLC. All rights reserved. Comparison of Tax Proposals 21This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation. As used in this document, “Deloitte” means Deloitte Tax LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright © 2021 Deloitte Development LLC. All rights reserved.
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