The US Treasury Department has issued a press release entitled Leveling the Playing Field: Curbing Tax Havens and Removing Tax Incentives for Shifting Jobs Overseas. The press releases describes the Obama administrations plans to crack down on multinational corporations with US headquarters by:
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Limiting deferral of income recognition by requiring corporations to defer deductions associated with foreign profits until that income is repatriated.
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Closing Foreign Tax Credit loopholes by computing a taxpayers FTCs based on the amount of total foreign tax actually paid on total foreign earnings.
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Limiting the shifting of income to foreign subsidiaries which are currently treated as disregarded entities for U.S. tax purposes.
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Implementing new disclosure and enforcement measures on international investors and financial institutions.
The crack down on corporate taxes and multinational corporations includes stepped-up IRS examination efforts. As part of the plan, the IRS would be provided funds to hire almost 800 new employees devoted to international enforcement.
WHAT DOES THIS MEAN FOR MULTINATIONALS?
Multinational corporations should prepare themselves for increased enforcement activity by the IRS. Multinational taxpayers should: (i) review and update their record retention policies, (ii) analyze corporate structures to ensure that they remain viable and tax efficient under proposed changes to the law, (iii) review current and recent transactions and tax positions to identify any risks of tax assessments or penalties if reviewed by the IRS, and (iv) update existing compliance and reporting policies and programs to take into account increased reporting and disclosure requirements