The United States (US) Senate Finance Committee hearing on four Treasury nominations on 25 May, including for Lily Batchelder as Assistant Treasury Secretary for Tax Policy, featured significant discussion of international tax changes proposed by President Joe Biden as well as the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) 2.0 negotiations. Senator Rob Portman expressed concern about the Administration’s proposal to double the global intangible low-taxed income (GILTI) rate to 21% – which, with the proposed retention of the 20% foreign tax credit haircut for GILTI, would make the rate 26%-plus, noting its impact on US competitiveness.
Ranking Member Mike Crapo expressed concerns about changing the GILTI rate ahead of an OECD agreement and, in a 24 May letter (pdf), asked Treasury Secretary Janet Yellen for more information regarding the OECD BEPS 2.0 Pillar One negotiations, including how many US companies would be affected, which companies would be treated as “in scope,” the magnitude of profits that would be reallocated, and the effect on US tax revenues. Other senators on the committee asked about the effect of the 10% deemed return for tangible assets for companies building factories in high-tax jurisdictions and the importance of a global minimum tax, as well as voiced concerns about potential exemptions or carve-outs for some countries.
Coming up, President Biden’s FY 2022 budget is set for release on 28 May, White House Press Secretary Jen Psaki confirmed on 21 May. The Treasury Green Book, expected to provide considerably more detail regarding the Administration’s various tax proposals, will also be released.
With infrastructure negotiations among the White House and Senate Republicans appearing on hold after the Administration made a US$1.7 trillion counteroffer proposal on 21 May, there are reports that Senate Republicans will offer President Biden a nearly US$1 trillion infrastructure counterproposal on 27 May. The latest Republican offer reportedly would be paid for by repurposing unused coronavirus funds from prior COVID-19 bills. Senate Republicans are suggesting that President Biden indicated that US$1 trillion is the minimum amount that he would consider in a slimmed down infrastructure bill.
Offering a timeline, Senate Majority Leader Chuck Schumer earlier this week was quoted as saying that he plans for the Senate to move an infrastructure bill in July, either on a bipartisan basis or through reconciliation. “The bottom line is very simple, that it has always been our plan regardless of the vehicle to work on an infrastructure bill in July,” he said.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC
- Arlene Fitzpatrick
- Joshua Ruland
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
