New Regulation: Statutes, Pillars and the Build Back Better Act

GILTI Conscience

In this episode of the “GILTI Conscience” podcast, Skadden international tax attorney Paul Oosterhuis and associate Huzefa Mun join our hosts Nate Carden and David Farhat to discuss legislation, new regulations and the Build Back Better Act. They examine possible outcomes if the Build Back Better Act is not adopted, including changes in other tax regulations that could arise, as well as the potential impact of the “Two-Pillar Solution” on global taxation.

The Build Back Better Act has received a great deal of recent attention, but it doesn’t look like we’re going to see any movement on it in the near future. Many analysts therefore are focusing on what is likely to happen on the regulatory and pillars front were the bill not to pass. Paul suggests there would be a fair amount that the Treasury Department would want to consider with respect to the treatment of interest expense for U.S. multinationals. Possible changes include increased foreign tax rates, new check-the-box regulations and alterations in foreign tax credit regulations.

Next, the guests discuss whether the OECD’s two-pillar method will shift taxation away from standard international tax rules and bring about a global minimum level of taxation. Pillar One requires a physical presence in a country before that country can tax, and Pillar Two sets a minimum tax at a 15% rate. However, what happens if these pillars are enacted by other countries but not the U.S.? Paul and Hufeza expect that Pillar Two will not be difficult to enact in the EU, the U.K., Japan, Australia and many of the other major countries with multinationals. However, without Pillar Two, the U.S. would likely encounter problems for several years, unless major reform takes place. In addition, absent Pillar One, the U.S. is likely to face a period of chaos, unless it can “beta test” and see if a large group will adopt the pillar.

Finally, the group discusses a few other statutes and regulations you should be aware of relating to the Build Back Better Act and international taxation.

💡 Featured Guests 💡

Name: Paul Oosterhuis

What he does: Paul is Of Counsel in Skadden’s international tax sector. He has extensive experience in mergers and acquisitions, post-acquisition integration, internal restructurings, and joint ventures. He has been ranked in the top tier of Chambers USA each year since the guide was first released in 2003 and has been selected for inclusion in Chambers Global, Tax Directors Handbook, The Legal 500 U.S., Who’s Who Legal: Corporate Tax, IFLR1000 and The Best Lawyers in America. He also was named a 2017 BTI Client Service All-Star.

Organization: Skadden

Words of wisdom: “The final thing that is regulatory in nature that comes into play in all of this is the new foreign tax credit regs. The regulations have been like a tsunami coming through the international tax community since they became final.”

Connect: LinkedIn

Name: Huzefa Mun

What he does: Huzefa is an associate at Skadden, where he advises clients on US and international tax matters. He has particular experience advising multinational companies on IP structuring, transfer pricing audits and dispute resolutions, supply chain and operational tax planning, joint ventures, and real estate and REIT transactional and operational planning.

Organization: Skadden

Words of wisdom: “It's a really interesting time now because we're following up with tax law in the same way that we're following up with the 24-hour news cycle because everything is changing so rapidly. It's a very interesting time and there are so many different moving parts and there's so much complication going on. Trying to make sense of it is going to be, I think, the task for a lot of tax practitioners going forward.”

Connect: LinkedIn

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GILTI Conscience is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. Skadden’s tax team is recognized globally for providing clients with creative and innovative solutions to their most pressing transactional, planning, and controversy challenges. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.