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New U.S. Tax Law Adopts Provisions to Prevent Base Erosion

Volume 5 No 1    |   Read Article

By Stanley C. Ruchelman and Sheryl Shah

Following the lead of the O.E.C.D. and the European Commission (“E.C.”), the T.C.J.A. adopts several provisions designed to end tax planning opportunities. In some instances, the new provisions closely follow their foreign counterparts. In others, the provisions are specific to U.S. tax law. Among these changes are (i) the introduction of the G.I.L.T.I. minimum tax on the use of foreign intangible property by C.F.C.’s, (ii) the total revamp of Code §163(j) so that it reflects an interest ceiling rather than an earnings stripping provision, (iii) the restriction of tax benefits derived from the use of hybrid entities and transactions, (iv) the broadened scope of Subpart F through definitional changes, (v) legislative reversals of judicial decisions in which I.R.S. positions in transfer pricing matters were successfully challenged, and (vi) legislative reversals of a judicial decision invalidating Rev. Rul. 91-32 regarding the sale of partnership interests by foreign partner. Sheryl Shah and Stanley C. Ruchelman discuss these provisions and place them in context.  See more →