Ring: The Stages Of International Tax Reform

Diane Ring (Boston College), The Stages of International Tax Reform:

Since December 2017, tax conferences in the United States have focused substantially on the H.R. 1 tax reform legislation. No surprise there — the 2017 changes are among the most significant in the past thirty years. But over the past five months, through attending numerous tax conferences featuring international tax practitioners, I’ve observed some interesting developments in the nature of the discussions and debates at these conferences. These changes are pretty revealing about the process of absorbing the true impact of the new tax law, particularly in international tax. This weekend’s ABA May Tax Section Meeting in Washington, D.C. highlighted some of these trends.

Practitioners and taxpayers have moved into a deep analytical mode. They are no longer just trying to absorb the basics of the new rules; instead, they are now carefully identifying and articulating complicated but absolutely fundamental questions about the application of the regimes. It is beyond the scope of this post to explore those issues that occupied hours upon hours of debate over the weekend, but three brief examples provide a sense of their complexity...

Interplay among Rules. One big theme was the need for the government to clarify the interplay among rules, that is, the order in which various rules will be applied. So, for example, to the extent taxable income is a relevant component of different rules’ own internal workings—how will taxable income be calculated? Thus, in determining the taxable income limit in section 250(a)(2) which governs the availability of the section 250(a)(1) deduction (generally, a deduction of specified percentages of foreign derived intangible income and global intangible low-taxed income ), how will income be calculated?  Will it follow the inclusions under subpart F, new section 951A (GILTI), section 78, and  new section 250(b) (FDII) ? How does revised section 163(j) fit into the picture with section 250, and what income-related calculations are made prior to the application of the new section 163(j) limits?