Political Quotes

“Thank you, Ranking Member Risch. Without that clarification, article 23 does not describe the primary mechanism that mitigates double taxation for U.S. companies doing business abroad. Before the Tax Cuts and Jobs Act, TCJA, U.S. companies' foreign earnings were generally not subject to tax in the U.S. until the foreign earnings were distributed as dividends to the U.S., a concept generally referred to as ``deferral.'' For example, pre-TCJA, if a U.S. company operated in Chile through a subsidiary, the earnings of the Chilean subsidiary were generally not subject to U.S. tax until the subsidiary paid a dividend to the U.S. parent company. In order to prevent double taxation of the foreign earnings, under section 902 of the Tax Code, the U.S. provided a foreign tax credit for tax paid on those earnings. In this scenario, with respect to tax paid by the foreign subsidiary in Chile, the U.S. company would receive a dollar-for-dollar credit against its U.S. tax liability once the income was distributed, and subject to tax, in the U.S. in order to prevent double taxation of the dividend income. TCJA made significant changes to these rules. For one, it ended the concept of ``deferral.'' As a result of TCJA, U.S. companies are now generally subject to current U.S. tax on their foreign earnings, even if they are not immediately distributed to the U.S. parent, under the global intangible low-taxed income, GILTI, which consequently eliminated the need to impose U.S.…”