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June 14, 2024

Report on recent US international tax developments 14 June 2024

US House Speaker Mike Johnson (R-LA) and his fellow Republicans are mapping out legislative options and, according to reports, are setting the groundwork for budget reconciliation legislation in 2025, which would be broad in scope and address multiple areas, including tax. The Speaker said budget reconciliation legislation in 2025 would focus on "pro-growth policies" and "regulatory reform, reducing the size and scope of government."

Budget reconciliation generally permits legislation impacting revenues and spending to pass the Senate with 51 votes, rather than the regular 60-vote "filibuster" threshold, with some restrictions.

Though there is apparent unanimity within the Republican Party on the need to extend Tax Cuts and Jobs Act (TCJA) provisions, House and Senate Republicans are not as unified on the need to pay for the extensions. House members are more inclined to recognize the need for revenue offsets, while Senators maintain that pro-growth tax provisions do not require pay-fors.

House Ways & Means Chairman Jason Smith (R-MO) recently has been quoted as saying that some Republicans would support a corporate tax rate increase, although he does not. The Chairman further said he could envision lawmakers coming up with a total of approximately $2.5t in savings but finding $4t would be a "huge task." (The Congressional Budget Office recently estimated the approximate cost of a full TCJA extension to be $4t, not including interest.)

There are a number of tax issues at stake in this year's elections, including: (1) how to address the expiration of TCJA individual and passthrough provisions at the end of 2025 and scheduled changes to business provisions (such as the Global Intangible Low-taxed Income (GILTI), Foreign Derived Intangible Income (FDII), and Base Erosion and Anti-abuse Tax (BEAT) provisions), plus a potential corporate rate increase and any number of other proposals that could be pulled in to pay for those extensions; (2) the OECD global tax agreement, which Republicans in Congress have very vocally opposed; and (3) the Inflation Reduction Act energy tax credits.

The IRS in Notice 2024-47 again waived the penalty under IRC Section 6655 for a corporation's failure to pay estimated tax payments attributable to a portion of the corporation's alternative minimum tax (CAMT) due on or before 15 August 2024, for a tax year beginning in 2024.

This is the third time the IRS has waived the penalty, giving the same reason as it did for the previous waivers. Namely, the IRS cited the challenges of determining whether a corporation is subject to CAMT, i.e., determining what qualifies as an "Applicable Corporation" under IRC Section 59(k) and the amount of a corporation's CAMT liability under IRC Section 55.

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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