Some recent developments should spur action by Congress to reform US tax laws that address international taxation. Congress did this in 2017 but in an ill-conceived way, and it should be revamped.
The OECD initiative, Pillar Two, is a well-intentioned but flawed undertaking, aimed at addressing base erosion and profit-shifting by large multinational enterprises. The Biden administration, with congressional support, should use this nation’s political and economic muscle—and its powers of persuasion—to alter its design.
In another international tax event, the US Supreme Court will hear arguments in Moore v. United States, where taxpayers are challenging the constitutionality of Section 965 of the tax code. This provision—enacted in 2017 as part of the Tax Cuts and Jobs Act—was imposed when Congress adopted a “participation exemption.” It generally allows most domestic C corporations owning 10% or more of shares in a foreign subsidiary a deduction for foreign-sourced dividends it receives from that subsidiary.