United States

Potential US tax reform on the horizon

The new Trump administration and a Republican-controlled Congress are setting the stage for a significant "must-pass" tax bill. Numerous 2017 Tax Cuts and Jobs Act (P.L. 115-97 or so-called TCJA) business and international provisions are set to expire or change at the end of 2025. A lack of action would result in across-the-board increases for some business taxes. For example:

• The global intangible low-taxed income (GILTI) regime and the base erosion anti-avoidance tax (BEAT) are scheduled to become more restrictive.
• The deduction for foreign-derived intangible income (FDII) is scheduled to be reduced.
• Look-through treatment for certain controlled foreign corporation (CFC) income is set to expire. 
• 100% bonus depreciation for certain qualified property is slated to phase out.

It’s currently unclear what legislation will be enacted. However, President Trump has suggested various pro-growth tax policy proposals including, for example, a proposal to reduce the federal corporate rate to 15% for “companies making products in the United States.” He has also announced that he would like to reinstate the 100% bonus depreciation and restore the Section 174 expensing for US-based research activities. President Trump further stated that many of the clean energy tax credits enacted as part of the 2022 Inflation Reduction Act should be repealed.

No US implementation of "Pillar Two"

Many countries continue to implement Pillar Two of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which aims to establish a coordinated global minimum corporate tax rate. The Trump administration and Congressional Republicans have announced opposition to the OECD proposals and may consider retaliatory measures against companies based in jurisdictions enforcing such taxes. In addition, consensus on so-called "Pillar One" has also been elusive.

New tariffs

President Trump has announced an “America First Trade Policy” through an Executive Order (EO) aimed at reshaping US trade relations, and encouraging domestic manufacturing. The EO calls for a review of the causes of US trade deficits and recommendations on tariffs or other measures that may be appropriate. The EO also states that the US-Mexico-Canada agreement and other trade agreements are to be reviewed and may be renegotiated.

Shifting regulatory landscape

The US regulatory landscape has been dramatically altered as a result of the Supreme Court’s recent decision in Loper Bright Enterprises. Loper overturned the Chevron doctrine, which had been in place for 40 years and generally required courts to defer to an administrative agency’s regulatory interpretation of a statute unless the agency interpretation was considered unreasonable.

A number of tax regulatory guidance packages (both final and proposed) were released within the last several months of the Biden administration, as well as notices to issue future regulations. Topics include, for example, a new transfer pricing method to apply so-called Amount B, corporate alternative minimum tax (CAMT), previously taxed earnings and profits (PTEP), stock buy backs, dual consolidated losses, and disregarded payment losses. The Trump administration will need to determine whether to follow the same general approach of its predecessors or make a meaningful change in direction.