On 7 February 2013, US Senator Bernie Sanders (I-Vt.) introduced new legislation in the US Senate that would seek to combat corporate tax avoidance through the use of tax havens. Representative Jan Schakowsky (D-Ill.) introduced the companion Bill in the House. The Corporate Tax Fairness Act would effectively end deferral by modifying the definition of subpart F under Code Sec. 952 to include all foreign-sourced income. US corporations, however, would continue to get a credit for the foreign tax they pay against their US tax liability. The Bill would also modify the foreign tax credit limitation under Code Sec. 904 to permit foreign tax credits to only offset income from the county in which it is earned.
Additionally, large integrated dual capacity taxpayers that are oil companies would be subject to modified rules that would disallow a foreign tax credit if the foreign jurisdiction does not impose an income tax, or the amount of the company’s levy exceeds the generally applicable income tax imposed. “Oil and gas companies have been disguising royalty payments to foreign governments as foreign taxes,” Senator Sanders said in an accompanying fact sheet.
The Bill also seeks to prevent US companies from using post-office boxes to claim being a foreign company. The Bill would prevent corporations that are managed and controlled in the US from avoiding US tax by claiming to be a foreign company by using a foreign mailing address.
Source: Thomson Reuters International Taxes Weekly
[LTN 28, 12/2/13]