Legislative update - Analysis of Senate Finance discussion draft of international tax reform proposals 

November 21:  Senate Finance Committee Chairman Max Baucus (D-MT) on November 19 released a discussion draft outlining possible reforms to the international tax provisions of the Internal Revenue Code. The draft envisions two possible approaches (described as Option Y and Option Z), each of which would represent a substantial change in how the United States taxes international operations of U.S.-based corporate groups through controlled foreign corporations (CFCs).

Notably, neither option describes any current proposals to change the treatment of foreign income earned through a branch or partnership; presumably as under current law, those amounts would remain fully subject to U.S. tax (with possible reduction due to foreign tax credits).

In addition, the draft proposes certain common changes to be made regardless of which option is adopted. These common changes are generally intended to complement the proposed Option Y or Option Z changes. Certain of these common proposals, however, may be viewed as correcting perceived flaws in the current rules and conceivably could be targeted to pay for other tax legislation regardless of whether tax reform proceeds.

Read a November 2013 report [PDF 1.5 MB] prepared by KPMG LLP: Analysis of Senate Finance Discussion Draft of International Tax Reform Proposals

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