24 January 2025 Report on recent US international tax developments — 24 January 2025 President Donald Trump was inaugurated the 47th President of the United States on 20 January and immediately signed a record number of executive orders (EOs) on a variety of topics that included the OECD BEPS project and trade policy, among many others. The President's OECD Global Tax Deal Executive Order states "the Global Tax Deal has no force or effect" in the US and directs Treasury and US representative to the OECD to "notify the OECD that any commitments made by the prior administration on behalf of the United States with respect to the Global Tax Deal have no force or effect within the United States absent an act by the Congress adopting the relevant provisions of the Global Tax Deal." In conjunction with the United States Trade Representative (USTR), officials are directed to investigate whether any foreign countries are not in compliance with any tax treaty with the US or "have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies, and develop and present … a list of options for protective measures or other actions that the US should adopt or take in response, within 60 days." A Global Tax Alert highlights the EO on BEPS 2.0. The America First Trade Policy Executive Order provides that Treasury, the Commerce Department, and the USTR "shall investigate whether any foreign country subjects United States citizens or corporations to discriminatory or extraterritorial taxes pursuant to section 891 of title 26, United States Code." IRC Section 891 allows for the doubling of rates of tax on citizens and corporations of certain foreign countries if the President finds that US citizens or corporations are being subjected to discriminatory or extraterritorial taxes. In 2019, Senate Finance Committee members urged the prior Trump Administration to consider using this tool in retaliation for unilateral digital tax measures. The Trade EO does not include the enactment of new tariffs, although President Trump indicated during the signing ceremony his plan to impose 25% tariffs on Canada and Mexico as soon as 1 February. A Global Tax Alert provides details on the Trade EO. Citing the President's executive orders, House Ways & Means Chairman Jason Smith (R-MO) and all Committee Republicans on 21 January reintroduced the Defending American Jobs and Investment Act (H.R. 591) (news release). The bill would (1) require Treasury to identify extraterritorial taxes and discriminatory taxes enacted by foreign countries that affect US businesses, such as the UTPR (known as the undertaxed profits rule); and (2) increase tax rates on the US income of investors and corporations in the countries by 5 percentage points each year for four years, with tax rates elevated by 20 percentage points while the extraterritorial and discriminatory taxes are in effect. President Trump, on 23 January, also addressed the Davos World Economic Forum by video, explaining his plans to lower the corporate tax rate for corporations that make products in the US and penalize those that don't. The President said, "if you don't make your product in America, which is your prerogative, then very simply you will have to pay a tariff, differing amounts but a tariff, which will direct hundreds of billions of dollars and even trillions of dollars into our Treasury." During Q&A, the President said of the corporate tax rate, "We're going to bring it down to 15%, if you make your product in the USA." In a statement released on 17 January, IRS Commissioner Danny Werfel announced his resignation effective 20 January. IRS Deputy Commissioner Douglas O'Donnell has assumed the role of Acting IRS Commissioner. President Trump has nominated former Rep. Billy Long (R-MO) to be the next IRS Commissioner, which will require Senate confirmation.
Document ID: 2025-0322 | ||||