OECD Gives U.S. Companies Reprieve From International Minimum Tax

On February 2, the Organization for Economic Cooperation and Development (OECD) offered details about how the U.S. tax system will interact with the corporate minimum taxes being implemented in the European Union, the United Kingdom, South Korea, and other countries. The rules offer a partial reprieve for U.S. companies through 2025, but firms in the United States are still likely to face higher international taxes.

Read the guidance here.

As Connecting the Dots reported at the time, in October 2021 more than 130 countries agreed to impose a 15 percent minimum corporate tax rate on companies that have more than $125 million in annual profits and have a global effective tax rate of less than 15 percent. Under the plan, home countries would need to impose a top-up provision to increase the tax companies pay if their rate is lower than 15 percent.

While the Biden administration agreed to the plan in principle, tax and spending policy must originate in Congress and the administration was not able to get House and Senate approval before the 2022 midterm elections. Gaining that approval is even less likely now.

Indeed, U.S. House Ways and Means Committee Chair Jason Smith (R-Mo.) told The Wall Street Journal the OECD agreement has no path forward in Congress. “The Biden administration cannot override Congress’s sole tax-writing authority under the Constitution or turn that power over to foreign bureaucrats. We will reject all proposals that benefit foreign interests over U.S. workers and families,” Rep. Smith pledged.