Proposed Repeal of 80/20 Company Exception
TAX TREATY OVERRIDE PROPOSAL USED AS HEALTH CARE PAY-FOR
SECTION 163(J)
DEFERRED COMPENSATION: SECTION 409A
REVISIONS TO FBAR INSTRUCTIONS
REINSURANCE
Tax Haven Legislation
FIRPTA
DOUBLE TAX TREATIES
OFII DOCUMENTS:
OFII Letter to Ways & Means Committee
January 20, 2010
OFII Letter to Finance Committee
January 20, 2010
AT ISSUE:
House Democrats have proposed using a tax treaty override mechanism to help offset the cost of health care reform. The proposal would directly raise taxes on Insourcing companies whose parent is based in a country that does not have a tax treaty with the United States.
The proposal is a modified version of the more onerous "Doggett Tax" which was part of the Farm Bill (H.R. 2419). The tax hike passed the House in 2007 as part of the Farm Bill but was removed by the Senate. In 2008, the House included this provision in the AMT Relief Bill, but the Senate opposed it as a violation of bilateral tax treaties.
OFII recommends re-negotiating tax treaties that do not already contain a Limitation of Benefits (LOB) provisions is a more appropriate way to address concerns.
Articles:
Another Front in the Health Care Fight
Forbes.com, July 21, 2009
OFII DOCUMENTS:
OFII Letter to Chairman Rangel & Ranking Member Camp opposing Treaty override
Section 203 of H.R. 6275 Text
OFII RESOURCES:
Background
on Tax Treaties
Countries with Tax Treaties with the United States
Chart
of U.S. Withholding Tax Rates
Doggett Tax Archives
AT ISSUE :
Internal Revenue Code IRC Section 163 (j)) arbitrarily and discriminatorily limits tax deductions U.S. subsidiaries can take on loans from related and unrelated (with a parent company guarantee) parties. U.S.-based companies do not face these same restrictions. There have been numerous attempts in Congress to further tighten this already discriminatory provision of the Code. OFII actively works against these proposals and continuously provides education to Capitol Hill on U.S. subsidiaries’ taxes and financial structures.
OFII DOCUMENTS:
OFII Letter to Chairman Thomas opposing discriminatory tax provision in the JOBS Act that would amend IRC Sect. 163(j); October 31, 2003
OFII White Paper Detailing Concerns on Related Party Interest Expense Proposal in '04 Budget;
April 7, 2003
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AT ISSUE :
Section 409A of the “American Jobs Creation Act of 2004” requires accelerated taxation (plus a 20% penalty tax) of many forms of deferred compensation. The statute applies to Stock Appreciation Rights ("SARs") and would require inclusion in the recipient's income at the time of vesting, rather than exercise. Fair market stock options are not subject to the new rules, although economically equivalent to SARs.
Prior to the Treasury Department issuing guidance to companies on the rules governing Section 409A, OFII submitted comments as to the implication for U.S. subsidiaries of foreign companies.
OFII DOCUMENTS:
OFII Comments to Treasury Department on Deferred Compensation Guidance:
March 30, 2005
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OFII Letter on Issues Raised in Notice 2009-62 and FBAR Filing Requirements
October 6, 2009
OFII
Letter to Secretary Paulson on IRS Response to FBAR Revisions
March 20, 2007
IRS
Response to OFII Proposed Revisions to FBAR
February 21, 2007
OFII
Letter on Proposted Revisions to the FBAR Instructions
June 5, 2006
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AT ISSUE :
The Majority Staff of the Senate Finance Committee has released a discussion draft of legislation that would unfairly tax U.S. reinsurance companies with foreign parent companies. U.S. Rep. Richard Neal (D-MA) introduced legislation (HR 6969) last year in the U.S. House of Representatives that would similarly tax U.S. reinsurance subsidiaries and he is expected to re-introduce his legislation this year.
The Senate draft legislation would impose an artificial, punitive and discriminatory limit on the ability of U.S. reinsurance subsidiaries to deduct legitimate business expenses, violating fundamental international tax principles and numerous tax treaties. The legislation would impact firms incorporated in the United States that are already subject to all the same laws as all U.S. companies.
This proposed legislation will discourage global reinsurance companies from conducting business in the United States, curbing the availability of reinsurance to U.S. consumers – particularly in hard-hit disaster areas like the Gulf Coast and earthquake-prone California, where global reinsurers tend to specialize. Because of this market impact, the legislation has been opposed by numerous State Insurance Commissioners and private consumer groups. Finally, by promoting discriminatory treatment of US subsidiaries, the legislation has been strongly criticized as a new form of protectionism by the European Commission, and the German and Swiss Governments.
DOCUMENTS:
Letter to Chairman Baucus from Swiss Embassy Opposing Reinsurance Tax
February 27, 2009
Letter to Chairman Baucus from German Embassy Opposing Reinsurance Tax
February 27, 2009
Former USTR Kantor Letter to Chairman Baucus Opposing Reinsurance Tax
February 27, 2009
OFII Letter to Senate Finance Committee
February 27, 2009
Letter to Russell Sullivan from EU Opposing Reinsurance Tax
February 20, 2009
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AT ISSUE :
The Stop Tax Haven Abuse Act (S. 506) introduced by U.S. Senator Carl Levin (D-MI) on March 2, 2009 contains a corporate residency provision that threatens to arbitrarily redefine some historically foreign-based companies as U.S. corporations for tax purposes. This provision violates U.S. international agreements and could lead to retaliation by U.S. trading partners. This legislation would have the unintended consequence of punishing global companies who have re-located worldwide functions, such as R&D centers, from foreign markets to the United States and deter such behavior in the future.
The provision of concern would swap the “place-of-organization test” currently used to determine the country of corporate residency with an arbitrary test of whether the “management and control” of a company is primarily in the United States. As a result, historically foreign headquartered companies may inadvertently be redefined as a U.S. company for tax purposes, subjecting that firm to taxes as a corporate resident of two different countries. Rather than allowing themselves to be subject to double-tax, corporations would likely move functions out of the U.S., leading to a loss of U.S. jobs and economic activity to foreign markets.
OFII DOCUMENTS:
OFII Letter to Senate Finance Committee and Leadership Re Managment and Control Provision
October 13, 2009
OFII Comments on Baucus Proposals to Fight Offshore Tax Evasion
June 9, 2009
OFII Comments on "Management and Control" in Stop Tax Havens Abuse Act
March 17, 2009
In Letter to Chairman Baucus, Former USTR Kantor Opposes Reinsurance Tax
February 27, 2009
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AT ISSUE :
The Foreign Investment in Real Property Tax Act, or FIRPTA, was established in 1980 to ensure foreign investors paid a tax on gain when they sold American real estate. Since then, laws and regulations have changed in such a way as to make this policy concern moot, making FIRPTA largely unnecessary. Rather than repealing a superfluous law, however, the IRS at the end of 2008 issued a notice that broadens considerably the scope of FIRPTA. Under the notice, foreign investment in infrastructure projects like toll roads, bridges and wind farms would likely face significant double taxation on capital gains, even though these investors are already paying U.S. federal and state taxes as corporations. The U.S. has had a long standing tax policy stating that foreign owned companies do not pay a capital gains tax since these gains are considered, by the U.S. government, to be within the taxing province of the home country government. By expanding FIRPTA in a way that would add a double tax to investments in these projects, the IRS is undermining the President’s stated goals of focusing on investments in infrastructure and the credit crunch, which already limits the available capital for these projects. The IRS notice is not a finalized rule for interpreting the application of FIRPTA and OFII has submitted detailed comments making the case for a reconsideration of this policy shift. It is not yet clear when a final decision will be made by the IRS.
OFII DOCUMENTS:
Comment Letter to IRS
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AT ISSUE :
The United States has entered into double tax treaties with foreign countries for over 70 years. Tax treaties are designed to encourage cross-border investment and economic activity. They also:
-Provide a way to resolve double taxation disputes between countries
-Help tax authorities enforce tax laws--for example, treaties help ensure an adequate tax information exchange between countries and incorporate mutual legal assistance provisions for tax enforcement
-Reduce barriers to foreign direct investment, such as double taxation and high "withholding" taxes
How it works:
Tax treaties help ensure that people and businesses pay tax in only one jurisdiction. Double taxation occurs when two countries both try to tax a single item of income earned by a corporation. One country may tax the income because the corporation is a resident in that country (residence taxation). The other country may tax the income because the activity generating the income occurred within its borders (source taxation).
Since tax treaties mainly exist to mitigate double taxation, the United States only enters into them when its treaty partner imposes significant taxes, which creates an environment for double taxation. Also, because tax treaties are partly designed to help facilitate tax enforcement and provide greater certainty regarding the application of tax rules, the United States generally will not enter into a tax treaty unless the other country provides assurances that it can and will exchange information on tax matters.
OFII DOCUMENTS:
OFII Letter to Chairman Kerry and Senator Lugar Supporting French Tax Protocol
September 15, 2009
Response from U.S. Department of State regarding French Tax Protocol
June 30, 2009
Letter to Secretary of State Clinton Supporting French Tax Protocol
June 2, 2009
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