1 1 (April 23, 2020)

handle is hein.crs/govdacy0001 and id is 1 raw text is: 















Interaction of International Tax Provisions

with Business Provisions in the CARES Act



Updated April 23, 2020
The Coronavirus Aid, Rcief, and Economic Security (CARES) Act (P.L. 116-136) included two general
tax benefits for business: noe opcraing losses (NOLs) and intercst deductions, which reduce taxable
income and tax liability. These provisions may interact with existing internationai tax provisions enacted
in the 2017 taK revision, popularly known as the Tax Cuts and Jobs Act, or TCJA (P.L. 115-97). The TCJA
also decreased tax rates, including reducing the corporate rate from 350% to 21%.


International Provisions in the TCJA

In transitioning from the prior international tax regime that taxed earnings of foreign subsidiaies
controlled by U.S. firms only when repatriated (paid as a dividend, with credits allowed for foreign taxes
up to the U.S. tax paid on foreign source income) to a system that exempted dividends but taxed some
foreign income currently, the TCJA imposed a transition (repatriation) tax (at 15.5% for cash and 8% for
other earnings) on accumulated untaxed earnings abroad (with proportional foreign tax credits allowed).
Firms could elect to spread the tax (a section 965 tax) over eight years.
The TCJA also enacted three regimes to address international profit-shifting. The global intangible low
taxed income (GILTI) provision imposes a tax on foreign subsidiary income, after deducting a deemed
return on tangible assets. A deduction of 50% is allowed for the remainder, with 80% of foreign taxes
credited. A deduction is also allowed for domestic foreign derived intangible income (FDII), to equalize
the treatment of intangible assets held domestically and abroad. The combined GILTI and FDII
deductions (under section 250) cannot exceed taxable income. The base erosion and anti-abuse tax
(BEAT) is a minimum tax applied to a base that adds certain deductions for payments to related foreign
parties and taxes the larger base at 10% (5% in 2018). BEAT applies to large firms with base erosion
payments of 3% or more of deductions.
(Some income of foreign subsidiaries that is easily shifted is currently taxed fully under both systems
referred to as Subpart F income.)





                                                                Congressional Research Service
                                                                https://crsreports.congress.gov
                                                                                     IN11314

What Is HeinOnline?

HeinOnline is a subscription-based resource containing nearly 2,700 academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline with pricing starting as low as $29.95

Access to this content requires a subscription. Please visit the following page to request a quote or trial:

Already a HeinOnline Subscriber?