A bipartisan bill introduced in the Senate on Thursday would bar companies that pay taxes to Russia or Belarus from receiving foreign tax credits or other benefits, Accounting Today reported. Senate Finance Committee Chair Ron Wyden (D-Ore.) and Sen. Rob Portman (R-Ohio) sponsored the legislation, which would add those two countries to a list of countries already ineligible for foreign tax credits, including North Korea, Iran, Syria and Sudan.
The two senators issued a statement saying, “American taxpayers should not subsidize the Russian war machine. Vladimir Putin continues to bomb civilians, and credible reports and strong evidence of war crimes, including execution of civilians and forced deportations, emerge daily.”
Wyden announced in March that he would be working on this change in policy.
According to a summary of the legislation, under existing tax code section 952(a)(5), income derived by a controlled foreign corporation from countries subject to section901(j) is automatically treated as “subpart F income.” This means that any income earned in that country is subject to the full 21-percent corporate rate, and any losses from that country cannot be used to offset other income earned as global intangible low-taxed income (GILTI).
The legislation would provide for a safe harbor for companies that have already exited or are rapidly shutting down operations in Russia and Belarus. The summary states, “Such companies may be eligible to have section 952(a)(5) turned off, such that losses from those countries could be treated as GILTI losses, rather than being in subpart F (foreign taxes remain ineligible as a credit or deduction). This safe harbor is intended to allow companies that have substantially shut down operations in Russia or Belarus to utilize losses that have occurred, or continue to occur. To qualify for the safe harbor, gross revenues in Russia or Belarus need to drop, compared to 2021, by at least 85 percent in 2022 and 95 percent in 2023 and later. The test period for the year begins once a country is subject to section 901(j). Treasury is authorized to develop an alternative calculation for access to the exit safe harbor, and to exclude revenue from sales under an Office of Foreign Asset Control humanitarian general or specific license, or revenue on other humanitarian grounds as determined by the Secretary of the Treasury, from the calculation as revenue from Russia or Belarus.”
The list of tax benefits that the legislation would deny includes the following:
● Any tax treaty benefits,
● The exemption from withholding for foreign governments (section 892),
● The exemption from withholding for a foreign central bank (section 895),
● The exemption from withholding for portfolio interest (sections 871(h) and 881(c)),
● The “trading safe harbor” (section 864(b)),
● Exemption from tax for shipping income (section 883), and
● Exemptions from Foreign Investment in Real Property Tax Act withholding (section 897(l)).
The loss of tax benefits would apply to three categories of identified persons:
1. Any person already sanctioned by the United States in relation to the invasion of Ukraine,
2. The governments of Russia and Belarus, and
3. Any other person identified by the Treasury secretary (in consultation with the secretary of state) if repeal of the tax benefits would advance efforts to restore and maintain the peace, security, stability, sovereignty, and territorial integrity of Ukraine, and the person is either:
a. A person participating in the invasion of Ukraine with over $1 million in U.S. assets or income,
b. An entity organized in Russia or Belarus (excluding controlled foreign corporations) that sells goods or services to the Russian or Belarusian governments, or
c. An executive, board member, or officer of such entity.
In addition, the Treasury secretary can identify any person that is related to a person that is identified under one of the three categories. If an entity is controlled by a person that has lost tax benefits under this section, the secretary is authorized to issue regulations applying the loss of tax benefits to the controlled person. The secretary must also report to Congress on the process and justification for its selections.
The legislation also provides that tax information exchange for Russia and Belarus under a tax treaty or an intergovernmental agreement is suspended as long as section 901(j) applies.
A bipartisan bill introduced in the Senate on Thursday would bar companies that pay taxes to Russia or Belarus from receiving foreign tax credits or other benefits, Accounting Today reported. Senate Finance Committee Chair Ron Wyden (D-Ore.) and Sen. Rob Portman (R-Ohio) sponsored the legislation, which would add those two countries to a list of countries already ineligible for foreign tax credits, including North Korea, Iran, Syria and Sudan.
The two senators issued a statement saying, “American taxpayers should not subsidize the Russian war machine. Vladimir Putin continues to bomb civilians, and credible reports and strong evidence of war crimes, including execution of civilians and forced deportations, emerge daily.”
Wyden announced in March that he would be working on this change in policy.
According to a summary of the legislation, under existing tax code section 952(a)(5), income derived by a controlled foreign corporation from countries subject to section901(j) is automatically treated as “subpart F income.” This means that any income earned in that
country is subject to the full 21-percent corporate rate, and any losses from that country cannot be used to offset other income earned as global intangible low-taxed income (GILTI).
The legislation would provide for a safe harbor for companies that have already exited or are rapidly shutting down operations in Russia and Belarus. The summary states, “Such companies may be eligible to have section 952(a)(5) turned off, such that losses from those countries could be treated as GILTI losses, rather than being in subpart F (foreign taxes remain ineligible as a credit or deduction). This safe harbor is intended to allow companies that have substantially shut down operations in Russia or Belarus to utilize losses that have occurred, or continue to occur. To qualify for the safe harbor, gross revenues in Russia or Belarus need to drop, compared to 2021, by at least 85 percent in 2022 and 95 percent in 2023 and later. The test period for the year begins once a country is subject to section 901(j). Treasury is authorized to develop an alternative calculation for access to the exit safe harbor, and to exclude revenue from sales under an Office of Foreign Asset Control humanitarian general or specific license, or revenue on other humanitarian grounds as determined by the Secretary of the Treasury, from the calculation as revenue from Russia or Belarus.”
The list of tax benefits that the legislation would deny includes the following:
● Any tax treaty benefits,
● The exemption from withholding for foreign governments (section 892),
● The exemption from withholding for a foreign central bank (section 895),
● The exemption from withholding for portfolio interest (sections 871(h) and 881(c)),
● The “trading safe harbor” (section 864(b)),
● Exemption from tax for shipping income (section 883), and
● Exemptions from Foreign Investment in Real Property Tax Act withholding (section 897(l)).
The loss of tax benefits would apply to three categories of identified persons:
1. Any person already sanctioned by the United States in relation to the invasion of Ukraine
2. The governments of Russia and Belarus and
3. Any other person identified by the Treasury secretary (in consultation with the secretary of state) if repeal of the tax benefits would advance efforts to restore and maintain the peace, security, stability, sovereignty, and territorial integrity of Ukraine, and the person is either:
a. A person participating in the invasion of Ukraine with over $1 million in U.S. assets or income, b. An entity organized in Russia or Belarus (excluding controlled foreign corporations) that sells goods or services to the Russian or Belarusian governments, or
c. An executive, board member, or officer of such entity.
In addition, the Treasury secretary can identify any person that is related to a person that is identified under one of the three categories. If an entity is controlled by a person that has lost tax benefits under this section, the secretary is authorized to issue regulations applying the loss of tax benefits to the controlled person. The secretary must also report to Congress on the process and justification for its selections.
The legislation also provides that tax information exchange for Russia and Belarus under a tax treaty or an intergovernmental agreement is suspended as long as section 901(j) applies.
A bipartisan bill introduced in the Senate on Thursday would bar companies that pay taxes to Russia or Belarus from receiving foreign tax credits or other benefits, Accounting Today reported. Senate Finance Committee Chair Ron Wyden (D-Ore.) and Sen. Rob Portman (R-Ohio) sponsored the legislation, which would add those two countries to a list of countries already ineligible for foreign tax credits, including North Korea, Iran, Syria and Sudan.
The two senators issued a statement saying, “American taxpayers should not subsidize the Russian war machine. Vladimir Putin continues to bomb civilians, and credible reports and strong evidence of war crimes, including execution of civilians and forced deportations, emerge daily.”
Wyden announced in March that he would be working on this change in policy.
According to a summary of the legislation, under existing tax code section 952(a)(5), income derived by a controlled foreign corporation from countries subject to section901(j) is automatically treated as “subpart F income.” This means that any income earned in that
country is subject to the full 21-percent corporate rate, and any losses from that country cannot be used to offset other income earned as global intangible low-taxed income (GILTI).
The legislation would provide for a safe harbor for companies that have already exited or are rapidly shutting down operations in Russia and Belarus. The summary states, “Such companies may be eligible to have section 952(a)(5) turned off, such that losses from those countries could be treated as GILTI losses, rather than being in subpart F (foreign taxes remain ineligible as a credit or deduction). This safe harbor is intended to allow companies that have substantially shut down operations in Russia or Belarus to utilize losses that have occurred, or continue to occur. To qualify for the safe harbor, gross revenues in Russia or Belarus need to drop, compared to 2021, by at least 85 percent in 2022 and 95 percent in 2023 and later. The test period for the year begins once a country is subject to section 901(j). Treasury is authorized to develop an alternative calculation for access to the exit safe harbor, and to exclude revenue from sales under an Office of Foreign Asset Control humanitarian general or specific license, or revenue on other humanitarian grounds as determined by the Secretary of the Treasury, from the calculation as revenue from Russia or Belarus.”
The list of tax benefits that the legislation would deny includes the following:
● Any tax treaty benefits,
● The exemption from withholding for foreign governments (section 892),
● The exemption from withholding for a foreign central bank (section 895),
● The exemption from withholding for portfolio interest (sections 871(h) and 881(c)),
● The “trading safe harbor” (section 864(b)),
● Exemption from tax for shipping income (section 883), and
● Exemptions from Foreign Investment in Real Property Tax Act withholding (section 897(l)).
The loss of tax benefits would apply to three categories of identified persons:
1. Any person already sanctioned by the United States in relation to the invasion of Ukraine
2. The governments of Russia and Belarus and
3. Any other person identified by the Treasury secretary (in consultation with the secretary of state) if repeal of the tax benefits would advance efforts to restore and maintain the peace, security, stability, sovereignty, and territorial integrity of Ukraine, and the person is either:
a. A person participating in the invasion of Ukraine with over $1 million in U.S. assets or income, b. An entity organized in Russia or Belarus (excluding controlled foreign corporations) that sells goods or services to the Russian or Belarusian governments, or
c. An executive, board member, or officer of such entity.
In addition, the Treasury secretary can identify any person that is related to a person that is identified under one of the three categories. If an entity is controlled by a person that has lost tax benefits under this section, the secretary is authorized to issue regulations applying the loss of tax benefits to the controlled person. The secretary must also report to Congress on the process and justification for its selections.
The legislation also provides that tax information exchange for Russia and Belarus under a tax treaty or an intergovernmental agreement is suspended as long as section 901(j) applies.
A bipartisan bill introduced in the Senate on Thursday would bar companies that pay taxes to Russia or Belarus from receiving foreign tax credits or other benefits, Accounting Today reported. Senate Finance Committee Chair Ron Wyden (D-Ore.) and Sen. Rob Portman (R-Ohio) sponsored the legislation, which would add those two countries to a list of countries already ineligible for foreign tax credits, including North Korea, Iran, Syria and Sudan.
The two senators issued a statement saying, “American taxpayers should not subsidize the Russian war machine. Vladimir Putin continues to bomb civilians, and credible reports and strong evidence of war crimes, including execution of civilians and forced deportations, emerge daily.”
Wyden announced in March that he would be working on this change in policy.
According to a summary of the legislation, under existing tax code section 952(a)(5), income derived by a controlled foreign corporation from countries subject to section901(j) is automatically treated as “subpart F income.” This means that any income earned in that
country is subject to the full 21-percent corporate rate, and any losses from that country cannot be used to offset other income earned as global intangible low-taxed income (GILTI).
The legislation would provide for a safe harbor for companies that have already exited or are rapidly shutting down operations in Russia and Belarus. The summary states, “Such companies may be eligible to have section 952(a)(5) turned off, such that losses from those countries could be treated as GILTI losses, rather than being in subpart F (foreign taxes remain ineligible as a credit or deduction). This safe harbor is intended to allow companies that have substantially shut down operations in Russia or Belarus to utilize losses that have occurred, or continue to occur. To qualify for the safe harbor, gross revenues in Russia or Belarus need to drop, compared to 2021, by at least 85 percent in 2022 and 95 percent in 2023 and later. The test period for the year begins once a country is subject to section 901(j). Treasury is authorized to develop an alternative calculation for access to the exit safe harbor, and to exclude revenue from sales under an Office of Foreign Asset Control humanitarian general or specific license, or revenue on other humanitarian grounds as determined by the Secretary of the Treasury, from the calculation as revenue from Russia or Belarus.”
The list of tax benefits that the legislation would deny includes the following:
● Any tax treaty benefits,
● The exemption from withholding for foreign governments (section 892),
● The exemption from withholding for a foreign central bank (section 895),
● The exemption from withholding for portfolio interest (sections 871(h) and 881(c)),
● The “trading safe harbor” (section 864(b)),
● Exemption from tax for shipping income (section 883), and
● Exemptions from Foreign Investment in Real Property Tax Act withholding (section 897(l)).
The loss of tax benefits would apply to three categories of identified persons:
1. Any person already sanctioned by the United States in relation to the invasion of Ukraine
2. The governments of Russia and Belarus and
3. Any other person identified by the Treasury secretary (in consultation with the secretary of state) if repeal of the tax benefits would advance efforts to restore and maintain the peace, security, stability, sovereignty, and territorial integrity of Ukraine, and the person is either:
a. A person participating in the invasion of Ukraine with over $1 million in U.S. assets or income, b. An entity organized in Russia or Belarus (excluding controlled foreign corporations) that sells goods or services to the Russian or Belarusian governments, or
c. An executive, board member, or officer of such entity.
In addition, the Treasury secretary can identify any person that is related to a person that is identified under one of the three categories. If an entity is controlled by a person that has lost tax benefits under this section, the secretary is authorized to issue regulations applying the loss of tax benefits to the controlled person. The secretary must also report to Congress on the process and justification for its selections.
The legislation also provides that tax information exchange for Russia and Belarus under a tax treaty or an intergovernmental agreement is suspended as long as section 901(j) applies.
A bipartisan bill introduced in the Senate on Thursday would bar companies that pay taxes to Russia or Belarus from receiving foreign tax credits or other benefits, Accounting Today reported. Senate Finance Committee Chair Ron Wyden (D-Ore.) and Sen. Rob Portman (R-Ohio) sponsored the legislation, which would add those two countries to a list of countries already ineligible for foreign tax credits, including North Korea, Iran, Syria and Sudan.
The two senators issued a statement saying, “American taxpayers should not subsidize the Russian war machine. Vladimir Putin continues to bomb civilians, and credible reports and strong evidence of war crimes, including execution of civilians and forced deportations, emerge daily.”
Wyden announced in March that he would be working on this change in policy.
According to a summary of the legislation, under existing tax code section 952(a)(5), income derived by a controlled foreign corporation from countries subject to section901(j) is automatically treated as “subpart F income.” This means that any income earned in that
country is subject to the full 21-percent corporate rate, and any losses from that country cannot be used to offset other income earned as global intangible low-taxed income (GILTI).
The legislation would provide for a safe harbor for companies that have already exited or are rapidly shutting down operations in Russia and Belarus. The summary states, “Such companies may be eligible to have section 952(a)(5) turned off, such that losses from those countries could be treated as GILTI losses, rather than being in subpart F (foreign taxes remain ineligible as a credit or deduction). This safe harbor is intended to allow companies that have substantially shut down operations in Russia or Belarus to utilize losses that have occurred, or continue to occur. To qualify for the safe harbor, gross revenues in Russia or Belarus need to drop, compared to 2021, by at least 85 percent in 2022 and 95 percent in 2023 and later. The test period for the year begins once a country is subject to section 901(j). Treasury is authorized to develop an alternative calculation for access to the exit safe harbor, and to exclude revenue from sales under an Office of Foreign Asset Control humanitarian general or specific license, or revenue on other humanitarian grounds as determined by the Secretary of the Treasury, from the calculation as revenue from Russia or Belarus.”
The list of tax benefits that the legislation would deny includes the following:
● Any tax treaty benefits,
● The exemption from withholding for foreign governments (section 892),
● The exemption from withholding for a foreign central bank (section 895),
● The exemption from withholding for portfolio interest (sections 871(h) and 881(c)),
● The “trading safe harbor” (section 864(b)),
● Exemption from tax for shipping income (section 883), and
● Exemptions from Foreign Investment in Real Property Tax Act withholding (section 897(l)).
The loss of tax benefits would apply to three categories of identified persons:
1. Any person already sanctioned by the United States in relation to the invasion of Ukraine
2. The governments of Russia and Belarus and
3. Any other person identified by the Treasury secretary (in consultation with the secretary of state) if repeal of the tax benefits would advance efforts to restore and maintain the peace, security, stability, sovereignty, and territorial integrity of Ukraine, and the person is either:
a. A person participating in the invasion of Ukraine with over $1 million in U.S. assets or income, b. An entity organized in Russia or Belarus (excluding controlled foreign corporations) that sells goods or services to the Russian or Belarusian governments, or
c. An executive, board member, or officer of such entity.
In addition, the Treasury secretary can identify any person that is related to a person that is identified under one of the three categories. If an entity is controlled by a person that has lost tax benefits under this section, the secretary is authorized to issue regulations applying the loss of tax benefits to the controlled person. The secretary must also report to Congress on the process and justification for its selections.
The legislation also provides that tax information exchange for Russia and Belarus under a tax treaty or an intergovernmental agreement is suspended as long as section 901(j) applies.