Base Erosion Minimum Tax May Mean Change for Foreign Affiliates of US Multinationals

By and on December 22, 2017

On November 16, 2017, we participated in a panel discussion at Tax Executives Institute’s (TEI’s) Chicago International Tax Forum regarding base erosion measures under the (then proposed) House and Senate tax reform bills. The House proposed a new 20 percent excise tax on most related-party payments (other than interest) that are deductible or includible in cost of goods sold or depreciable/amortizable basis. The Senate proposed a base erosion minimum tax on certain outbound base erosion payments paid by a corporation to foreign related parties. The conference committee has since submitted a conference report to accompany the Tax Cuts and Jobs Act that adopts the Senate’s proposed base erosion measure, with some changes. The base erosion minimum tax is equal to the excess of 10 percent of the modified taxable income of the corporation over an amount equal to the taxpayer’s regular tax liability reduced by certain Chapter 1 credits. The base erosion minimum tax could impact any multinational group in which foreign affiliates provide services, intellectual property, depreciable or amortizable property and other deductible items to related US corporations. It remains to be seen how the base erosion minimum tax will affect businesses in practice, and how countries with which the United States has a tax treaty will respond.

Britt HaxtonBritt Haxton
Britt Haxton focuses her practice on US and international tax matters for US and non-US multinationals. Britt regularly advises clients on tax-free and taxable acquisitions, dispositions, restructurings and liquidations. In addition, she has experience in providing advice on the Foreign Account Tax Compliance Act (FATCA) compliance and reporting. Britt also advises clients on international tax issues, including foreign tax credit, subpart F and application of bilateral income tax treaties. Read Britt Haxton's full bio.


Barry J. QuirkeBarry J. Quirke
Barry J. Quirke focuses his practice on international corporate tax matters, including planning for corporate acquisitions, dispositions, reorganizations, spin-offs, joint ventures, intercompany transactions and cross-border financings. He works extensively with multinational corporations on post-acquisition integration strategies. Read Barry Quirke's full bio.

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