Tax Provisions in Proposed Health Care Legislation Would Limit Benefits Provided by U.S. Income Tax Treaties

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Foreign companies with activities in the United States should take note of the “Americans Affordable Health Choices Act of 2009? (”H.R. 3200?). Although H.R. 3200 primarily addresses health care reform in the United States, it also includes a tax provision that affects the U.S. taxation of U.S. source interest, dividends, rents and royalties paid to foreign companies otherwise entitled to preferential tax rates under U.S. income tax treaties.

If H.R. 3200 is enacted, the preferential tax rates provided by U.S. income tax treaties for interest, dividends, rents and royalties may not be available to a foreign corporation if received from its U.S. subsidiary corporation.

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