Robert M. Russell was quoted in a recent Tax Notes article entitled “International Tax Draft Offers New Details, but Major Gaps Remain” published on August 26, 2021. Russell comments on the latest draft international tax proposal from Senate Finance Committee Democrats, released on August 25, 2021.
The article notes:
Robert Russell of Kostelanetz and Fink LLP welcomed the added details provided by the draft. “It’s nice to continue to see some more meat on the bones,” he told Tax Notes. “I’m pretty interested in the footnotes and level of detail that they put in there. And some fact patterns were quite interesting.”
But Russell noted that some blanks still need to be filled in, such as the GILTI, FDII, and BEAT rates. “It seems to be a lot of international provisions are going to end up being a plug number. . . How do [Senate Democrats] dial that up or turn it down to get to where [they] want?” he asked.
Russell said he was heartened by the draft’s recognition that losses must be addressed, especially given the Democratic consensus to move toward a CbC application of GILTI more generally. “In the life cycle of a company, if they are starting up and it takes a while to generate income, losses aren’t necessarily a sign of illegitimate planning,” Russell said. “What you don’t want to do is have legitimate losses that are just evaporated or stranded. . . . That’s kind of a tax planner’s nightmare.” Before a move to CbC, taxpayers could engage in self-help to some extent, Russell said, to offset some gain with the losses.
Any move to include an FTC haircut under subpart F would represent “a whole new way of looking at things,” Russell said. “For people getting hit with subpart F, it’s going to be painful.”
Noting that President Biden proposed to remove FDII altogether in favor of other R&D incentives, Russell said the discussion draft might be attempting to bridge the gap by “baking [R&D] into FDII.”
The discussion draft doesn’t shift on its position on the BEAT. Instead, in a single line at the end of the draft, it envisions incorporating SHIELD into the BEAT in some undetermined way. “It looks like it’s not a dismissal of SHIELD as a non-starter,” Russell said. “It appears that significant work would still be required to see how you could marry some of the policy objectives between the two.”
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