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March 15, 2024

Report on recent US international tax developments - 15 March 2024

President Biden released the Administration's FY2025 Budget proposal on 11 March, including previous proposals as well as some new tax measures. The Budget, a traditionally aspirational document that in this case represents a roadmap of what a second Biden term could look like on tax if the Democrats win the requisite control in Congress to make the proposals a reality, includes tax items outlined in the State of the Union. Treasury also released the Greenbook for the Budget, providing a general explanation and revenue estimates.

The President's FY 2025 proposals include increasing the corporate alternative minimum tax (CAMT) to 21% (from 15%), quadrupling the stock buyback tax to 4% (from 1%) and raising the corporate income tax rate to 28% (from 21%). The President's Budget also calls for a 25% billionaires' tax and ending corporate deductions for the compensation costs for any employee (not just top executives) of more than $1 million per year, among other provisions.

The IRS released a final revised version of Form W-9Request for Taxpayer Identification Number and Certification, with a new reporting requirement for flow-through entities. Withholding agents should use the new form as soon as possible, especially if the withholding agent is a flow-through entity that will need to determine its Schedule K-2/K-3 reporting requirements. The new Form W-9 requires, via a checkbox, that flow-through entities identify the presence of direct or indirect foreign partners, owners or beneficiaries when providing the form to other flow-through entities.

The instructions for the updated Form W-9 note that a partnership with indirect foreign partners may be required to complete Form 1065, U.S. Return of Partnership Income, Schedule K-2, Partners' Distributive Share Items — International, and Schedule K-3, Partner's Share of Income, Deductions, Credits, etc. — International. Schedules K-2 and K-3 are forms of US-international tax relevance that flow-through entities generally must complete, beginning in the 2021 tax year. Tax Alert 2022-0152 provides details on instructions for 2021 partnership Schedules K-2 and K-3.

The Treasury this week announced that the US had reached agreement with Turkiye to extend through 30 June 2024 the November 2021 moratorium on unilateral measures, including digital services taxes. Treasury announced on 15 February 2024 that a similar extension had been reached with five European governments.

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Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor