Proposed Legislation Would Sweep Certain Offshore Corporations into the U.S. Tax Net and Subject Their Worldwide Income to U.S. Tax

The Stop Tax Haven Abuse Act and the International Tax Competitiveness Act of 2013 are two parts of a package of three bills introduced in the U.S. House of Representatives on April 15 by Rep. Lloyd Doggett. A significant component of this proposed legislation would treat certain offshore corporations as U.S. corporations, thereby subjecting those corporations to U.S. taxation on their world wide income. In an extraordinary extension of U.S. taxing jurisdiction, the provision would thus eliminate deferral for some offshore corporations, while subjecting the income of other offshore corporations to U.S. taxing jurisdiction for the first time. Significantly, because of the broad language of the proposal, it potentially could apply to offshore holding companies, investment funds, insurance and reinsurance companies, and other less-obvious targets.

The language of the current proposal is identical to prior proposals and would apply to foreign corporations that either are publicly traded or have gross assets of $50 million or more, if their management and control occur primarily within the United States. Under the proposed legislation, management and control would be considered to occur primarily in the U.S. if substantially all of the executive officers and senior management who exercise day-to-day responsibilities for making decisions involving strategic, financial and operational policies of the corporation are located primarily in the United States. Any individual exercising such day-to-day responsibilities would be treated as an executive officer. The measure would not apply, however, to a controlled foreign corporation that is part of a group whose parent is a U.S. corporation that holds “substantial assets,” other than cash and stock in foreign subsidiaries, for use in the active conduct of a U.S. trade or business.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Eversheds Sutherland (US) LLP | Attorney Advertising

Written by:


Eversheds Sutherland (US) LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.