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Spotlight

President Joe Biden said during a 19 January press conference that he now supports breaking up his proposed Build Back Better (BBB) legislation into smaller bills. The President said: "It's clear to me we'll have to probably break it up" … "I think we can break the package up, get as much as we can now, come back, and fight for the rest later." He suggested that legislation could be signed into law before the mid-term elections in November. President Biden pointed to the clean energy provisions in the BBB legislation that could be brought forward and passed by Congress, but commented that extension of the enhanced child tax credit and spending for community colleges may not survive. Earlier, the press reported that that the Biden Administration was developing an alternative BBB proposal that will focus on climate provisions but without certain social spending proposals, although the White House denied that a specific proposal was being put forward.

Following the President's news conference, Senator Joe Manchin offered his view on a BBB substitute saying that discussions will have to begin "with a clean sheet of paper and start over." He also confirmed earlier reports that his $1.8 trillion BBB proposal from December is off the table. Senator Manchin said that he is always ready to talk, but indicated that no discussions are currently scheduled. Senator Manchin further explained his views on moving forward, saying the "main thing we need to do is take care of the inflation. Get your financial house in order. Get a tax code that works."

The Organisation for Economic Co-operation and Development (OECD) commentary related to the Base Erosion and Profit Shifting (BEPS) 2.0 Pillar Two model rules is forthcoming, perhaps in early February, according to an OECD official. The official recently was quoted as saying that when the Pillar Two commentary is completed, the Inclusive Framework will begin working on a multilateral instrument to coordinate implementation of the subject-to-tax rule. The official also confirmed that the Inclusive Framework is on schedule to complete the text of a multilateral convention to implement the Pillar One new taxing right, with both projects set for completion by the end of "first semester of this year."

Further, with the Biden Administration's BBB legislation stalled, there are concerns being raised as to how the US can enact the 15% global intangible low-taxed income (GILTI) rate and country-by-country calculation necessary to bring the US into compliance with the OECD-led global tax deal. According to a recent Wall Street Journal editorial, in order to avoid double taxation of US companies, "foreign governments will have to recognize Gilti (and tax payments made to Treasury under Gilti) as equivalent to the OECD minimum tax."

The OECD on 20 January released the 2022 Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. The latest OECD Transfer Pricing Guidelines include new guidance on the transactional profit method and guidance for tax administrations regarding hard-to-value intangibles. The 2022 edition also includes additional information with respect to transfer pricing for financial transactions.