What does "international tax reform" mean to your business? NP's Government Relations team can help you find out.

September 22, 2015

Government Relations Alert

Author(s): Thomas M. Reynolds, Sally Vastola, Douglas Dziak

This alert discusses what’s driving international tax reform and how new legislation can affect your business.

Leaders from the U.S. House of Representatives Ways and Means Committee and the U.S. Senate Finance Committee are increasingly writing about the importance of international tax reform to protecting U.S. jobs and bolstering the nation’s economy. And there’s a growing consensus among the business community and Congress that this reform can’t wait any longer. Recently, Senators Chuck Schumer (D-NY) and Rob Portman (R-OH) have drafted a bipartisan framework—one that we think is jumpstarting the reform process.

What’s driving international tax reform?
  • A U.S. tax code that encourages U.S. companies to move jobs and investments overseas.
  • A need to finance government priorities, such as a much needed long-term infrastructure bill.
How could international tax reform legislation like the Portman-Schumer framework affect my business?
Deemed repatriation. This may have significant tax consequences on your company’s earnings currently held or invested outside of the U.S.

Issue: Appropriate discounted repatriation rate, foreign tax credit treatment, and what is covered.

Innovation box regime. This would provide a substantially lower tax rate for intellectual property (IP). Legislation drafted by House Ways and Means Committee Members Charles Boustany (R-LA) and Richard Neal (D-MA) suggests a tax rate of 10% for IP as opposed to the 35% general corporate rate.

Issue: Given upcoming changes to OECD tax rules, without the innovation box, there will be greater pressures for U.S. companies to move R&D to countries with more favorable tax regimes, potentially costing jobs and U.S. innovation advantage.

Potential consequences of the Portman-Schumer framework
  • Repatriation may not be optional for your company and result in unknown, significant tax consequences.
  • Repatriated funds could be used “for investments in transportation infrastructure,” make certain tax extenders permanent, or lower tax rates.
Why us?
  • We can help you identify significant and impactful issues early on and develop sound government relations strategies addressing them.
  • Our team has bipartisan relationships in Congress with tax writing, transportation, and judiciary (IP jurisdiction) committees.
  • We draw on the experience of a former member of Congress, who was a senior member of the House Ways and Means Committee, a Chief of Staff, a Legislative Director, as well as other congressional staffers.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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