The Administration Offers Its Long-Awaited International Tax Proposals

Excerpt from Practical US/International Tax Strategies by Joseph B. Darby III (Greenberg Traurig LLP)

Earlier this month, the Obama Administration issued its long-awaited (and in some quarters, deeply dreaded) proposals for changes to U.S. international taxation. The Proposals were delivered, not in the form of meaty and complex legislation, but rather in a short, breezy, and at times maddeningly vapid news release. Still, the stakes are so high and the timing so crucial that it is hard not to try to extract some kind of deeper meaning from this relatively cursory pronouncement. First the good news: The Proposals do not, as many feared, recommend an outright repeal of all “deferral” with respect to the U.S. federal income taxation imposed on U.S. taxpayers that own foreign corporations. At the moment, U.S.-owned foreign corporations are subject to the so-called “anti-deferral” tax regimes, contained in Subpart F of the Code (controlled foreign corporation or “CFC” rules) and in Code Section 1291 et. seq., (Passive Foreign Investment Corporation, or “PFIC” rules). The current tax rules operate such that, so long as the CFC or PFIC regimes do not apply, income earned by a foreign subsidiary is not taxed until the foreign earnings are actually distributed as a dividend to the U.S. shareholder. That basic tax regime, at least at the moment, appears to remain intact.

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Administration Offers Its Long-Awaited International Tax Proposals

Excerpt from Practical US/International Tax Strategies by Joseph B. Darby III (Greenberg Traurig LLP)

On May 4, 2009, the Obama Administration (Administration) issued its long-awaited (and in some quarters, deeply dreaded) proposals for changes to U.S. international taxation.

The Proposals were delivered, not in the form of meaty and complex legislation, but rather in a short, breezy, and at times maddeningly vapid news release. Still, the stakes are so high and the timing so crucial that it is hard not to try to extract some kind of deeper meaning from this relatively cursory pronouncement. First the good news: The Proposals do not, as many feared, recommend an outright repeal of all “deferral” with respect to the U.S. federal income taxation imposed on U.S. taxpayers that own foreign corporations. At the moment, U.S.-owned foreign corporations are subject to the so-called “anti-deferral” tax regimes, contained in Subpart F of the Code (controlled foreign corporation or “CFC” rules) and in Code Section 1291 et. seq., (Passive Foreign Investment Corporation, or “PFIC” rules). The current tax rules operate such that, so long as the CFC or PFIC regimes do not apply, income earned by a foreign subsidiary is not taxed until the foreign earnings are actually distributed as a dividend to the U.S. shareholder. That basic tax regime, at least at the moment, appears to remain intact.

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Excerpt from WorldTrade Executive's Practical US/International Tax Strategies by Jonathan A. Sambur, Kenneth Klein, Patricia Anne Rexford, John T. Hildy and Rafic H. Barrage (Mayer Brown)


On December 24, 2008, the US Treasury and the IRS released final, temporary and proposed regulations relating to the application of the subpart F foreign base company sales income (FBCSI) rules to contract manufacturing arrangements.

These regulations finalized certain of the proposed regulations relating to this subject that were originally released on February 27, 2008. Also issued were temporary and proposed regulations that modify other of the February 27 proposed regulations. The text of the newly proposed regulations is the same as the corresponding temporary regulations.

Read More on These Regulations (free)