tax notes international - Tuck School of Business - Dartmouth College
tax notes international - Tuck School of Business - Dartmouth College
tax notes international - Tuck School of Business - Dartmouth College
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HIGHLIGHTS<br />
check by full <strong>tax</strong> on any unlocking <strong>of</strong> <strong>of</strong>fshore cash.<br />
And this in turn reduces U.S. <strong>tax</strong> revenue as well as<br />
provides an added incentive for multinationals to locate<br />
facilities abroad.<br />
President Barack Obama campaigned on reducing<br />
the incentives for <strong>of</strong>fshore job creation that U.S. <strong>tax</strong><br />
law provides by deferring <strong>tax</strong> on unrepatriated foreign<br />
earnings. Temporary repatriation relief is a pro-deferral<br />
provision.<br />
In early 2008, Senate Finance Committee member<br />
John Ensign, R-Nev., tried to include an amendment<br />
that would provide another round <strong>of</strong> foreign dividend<br />
relief in the Finance Committee markup <strong>of</strong> the first<br />
stimulus bill. His efforts failed then, and any repeated<br />
effort would likely run into even tougher opposition.<br />
And according to a January report by Ryan J. Donmoyer<br />
<strong>of</strong> Bloomberg News, there is little support in the<br />
House for another round <strong>of</strong> repatriation relief.<br />
<strong>Business</strong> lobbyists know all this, so now there is talk<br />
<strong>of</strong> a substitute for section 965 for multinationals whose<br />
foreign earnings are available in cash. Some policy-<br />
makers see expansion <strong>of</strong> section 956, which treats a<br />
controlled foreign corporation’s investment in U.S.<br />
property as gross income to its U.S. shareholder, as an<br />
acceptable alternative to a revival <strong>of</strong> section 965.<br />
As also reported in the Donmoyer article, Morgan<br />
Stanley, United Technologies, General Electric, and<br />
unnamed other multinationals are promoting a plan to<br />
Congress that would waive U.S. <strong>tax</strong> under subpart F<br />
on businesses that borrow from their <strong>of</strong>fshore units.<br />
This would be a statutory expansion <strong>of</strong> the section 956<br />
relief the Treasury provided in October to the general<br />
rule that loans from foreign subsidiaries should be<br />
treated as gross income. In Notice 2008-91, 2008-43<br />
IRB 1001, Doc 2008-22166, 2008 WTD 202-27, the IRS<br />
lengthened the permissible period <strong>of</strong> short-term loans<br />
from CFCs.<br />
♦ Lee A. Sheppard is a contributing editor to Tax<br />
Analysts. E-mail: lees@<strong>tax</strong>.org<br />
Martin A. Sullivan is a contributing editor to Tax<br />
Analysts. E-mail: martysullivan@comcast.net<br />
378 • FEBRUARY 2, 2009 TAX NOTES INTERNATIONAL<br />
(C) Tax Analysts 2009. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.