Wednesday, December 16, 2015

Tax extenders news for international tax buffs

The House version of the tax extenders bill (the "Protecting Americans From Tax Hikes Act of 2015") has now been posted online.

Of note to international tax buffs, the "active financing" exception to applying subpart F to financial income earned abroad by U.S. companies' foreign subsidiaries is made permanent by section 128 of the still-just-proposed Act.

Also, section 954(c)(6), the so-called "look-through" rule that often permits U.S. companies to avoid subpart F on foreign-to-foreign tax planning, without requiring the tedium of using hybrid entities, is extended through the end of 2019, by Act section 144.

The active financing rule's initial enactment and frequent extension have been popularly attributed to GE, at least as a key organizing player. GE presumably doesn't care about this rule any more, given their recent restructuring, but evidently it still has friends.

Extending section 954(c)(6) could certainly be viewed as in tension with the spirit of the OECD BEPS project, but it's not as if this makes it a surprise.

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