August 7, 2022
U.S. International Tax This Week for August 5
Ernst & Young's U.S. Tax This Week newsletter for the week ending August 5 is now available. Prepared by Ernst & Young's National Tax Department in Washington, D.C., this weekly update summarizes important news, cases, and other developments in U.S. taxation.
Senate Majority Leader Chuck Schumer on 4 August announced that the Senate would begin consideration of the budget reconciliation health/climate/tax bill, the Inflation Reduction Act of 2022 (H.R. 5376), on 6 August, at which time the final version of the reconciliation bill will be introduced. The announcement was followed hours later by news that Senator Kyrsten Sinema would "move forward" on the budget deal. Senator Schumer later said he had the votes to pass the legislation. The bill remains under review by the Senate Parliamentarian, who will make the determination of whether the provisions may be enacted under budget reconciliation rules.
"We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy economy in the Senate's budget reconciliation legislation," Senator Sinema said on 4 August. It is not clear what changes will be made to the 15% corporate minimum tax proposal to "protect advanced manufacturing." Senator Sinema also indicated she would work with Senate colleagues "to enact carried interest reforms." Several reports indicate the budget deal includes a new excise tax on stock buybacks that would pay for the removal of the carried interest measure from the bill.
If the Senate passes the measure, the House is expected to reconvene to approve the bill sometime next week.
Senate Democrats spent the last week working behind the scenes to bring forward the proposal. There had been ongoing talks to win the support of Senator Sinema, the 50th Senate Democratic vote necessary to pass the bill under budget reconciliation rules.
Senate Republicans have come out strongly against the bill. Ranking Finance Committee member Mike Crapo on 30 July released congressional Joint Committee on Taxation (JCT) data that he said showed that of the US$313 billion in total revenue expected to come from the corporate minimum tax proposal, $155.6 billion would come from manufacturers; $29.1 billion from wholesalers; $15.3 billion from retailers; $36 billion from IT; $35.1 billion from holding companies; and $42 billion from all other industries. In response, Senate Finance Committee Chairman Ron Wyden and committee member Elizabeth Warren on 2 August released JCT data that they claim indicated "Big pharma, tech and apparel companies would account for half the revenue coming in from 'manufacturers' under the [budget bill's] corporate minimum tax" proposal.
House Ways and Means Committee Republicans introduced a resolution dated 26 July that would require Treasury to produce documents showing the effects of the OECD BEPS 2.0 Pillar One rules. According to the resolution, the Treasury Secretary would be compelled to provide the House with "Pillar One tax revenue modeling data and reports" on the impact of the BEPS 2.0 Pillar One agreement on reallocation of taxing rights, as well as the overall economic effects of the Pillar One agreement.
EY Guides, Surveys, and Reports
EY publication highlights 2022 Q2 tax policy developments across the Americas
The second quarter of 2022 ushered in several significant tax policy developments across the Americas. The Americas Tax Policy Update highlights the top tax policy developments from April through June 2022.
Private equity and private capital — navigating transformative global and US legislative change (August 18)
During this EY Webcast, Ernst & Young professionals will discuss recent private equity and private capital industry trends and the outlook for US and international legislative and regulatory changes relevant to PE and alternative funds, transactions and portfolio companies.
Recent Tax Alerts
— Aug 03: Technical corrections to foreign tax credit regulations offer relief from cost recovery rules and include other impactful changes (Tax Alert 2022-1179)
— Aug 04: South Africa adds new occupations to its 2022 Critical Skills List (Tax Alert 2022-1186)
— Aug 02: Egypt provides relief from delay interest, additional taxes, and duties (Tax Alert 2022-1168)
— Jul 29: South Sudan enacts Financial Act 2021 - 2022 (Tax Alert 2022-1141)
— Aug 02: Korea's 2022 tax reform proposals include new global minimum tax rules to align with OECD BEPS 2.0 Pillar Two (Tax Alert 2022-1164)
— Aug 01: Korea announces 2022 tax reform proposals (Tax Alert 2022-1162)
— Aug 01: India's Supreme Court holds secondment of employees between group entities is a taxable service (Tax Alert 2022-1160)
Canada & Latin America
— Aug 04: New Colombian Government expected to propose tax reform (Tax Alert 2022-1185)
— Aug 04: Uruguay intends to change its traditional source criteria for corporate income tax purposes to comply with EU requirements (Tax Alert 2022-1181)
— Aug 03: Brazilian nationals traveling to Mexico are no longer eligible for electronic travel authorizations (Tax Alert 2022-1176)
— Aug 04: Luxembourg Tax Authority issues guidance on application of controlled foreign company rules in Luxembourg (Tax Alert 2022-1180)
— Jul 29: German Ministry of Finance issues first draft of Annual Tax Act 2022 including provisions regarding extraterritorial taxation of IP (Tax Alert 2022-1149)
— Jul 29: Luxembourg publishes draft tax transparency rules for digital platforms (Tax Alert 2022-1142)
— Jul 29: Australian Taxation Office issues Taxpayer Alert on treaty shopping arrangements to obtain reduced withholding tax rates (Tax Alert 2022-1150)
— Aug 03: OECD's Forum on Harmful Tax Practices concluded that the Costa Rican free trade zone regime is not harmful (Tax Alert 2022-1175)
— Jul 29: OECD releases 2022 update on peer review of preferential tax regimes and no or only nominal tax jurisdictions (Tax Alert 2022-1155)
Ernst & Young Client Portal, the leading source for news, analysis, and reference materials for corporate tax professionals, has a variety of content of interest to international tax practitioners, including:
— EY/Passport. EY/Passport is your guide to planning ventures in the global economy, offering a wealth of tax and business knowledge on more than 150 countries.
Because the matters covered herein are complicated, U.S. International Tax This Week should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor.