The report provided the following conclusions and recommendations in each of the three areas studied:

Study on Earnings Stripping

The focus of the earnings-stripping study is on excessive payments of deductible interest by foreign-controlled US corporations to related persons in whose hands that interest is partially or fully exempt from US tax . While the study notes that it is not possible to quantify accurately the extent of earnings stripping generally, strong evidence exists of earnings stripping by foreign-controlled domestic corporations that have undergone so-called "inversion" transactions, in which the US parent company of a multinational corporate group is replaced with a foreign parent in a low-tax or no-tax country.

The study did not find conclusive evidence of earnings stripping by foreign-controlled domestic corporations that had not inverted. More information is needed to reach a definitive conclusion on that issue. In order to obtain this additional information and to further the administration of the current earnings stripping rules, the study recommends that the relevant tax forms be modified to require more information about earnings stripping. The IRS has already released a new proposed form.

Study on Transfer Pricing

The transfer pricing study focuses on issues relating to the shifting of income from the United States through transactions between related parties. The study reviews Treasury regulatory guidance under Internal Revenue Code section 482 and the effectiveness of current transfer-pricing rules and compliance efforts to ensure that related-party transactions cannot be used to shift income out of the United States improperly.

The study indicates that the transfer pricing rules must be continually monitored to ensure their relevance to changing business conditions and to prevent income shifting from non-arm's length transfer pricing. The study recommends that the Treasury Department modernize and finalize three sets of transfer-pricing guidance. More specifically, the study recommends:

• Cost Sharing: Revision of the existing guidance on contributions for which arm's length consideration ("buy-in" payments) must be provided as a condition to entering into a cost sharing arrangement;
• Services: Completion of the related-party services regulations to reflect legal, business and economic developments since the regulations were issued in 1968; and
• Global Dealing: Completion of new rules to allow taxpayers to determine the amount of income from a global dealing operation that is subject to tax in the United States, as well as the source of such income and the circumstances under which such income is effectively connected with a US trade or business.

Study on US Income Tax Treaties

The study on US income tax treaties focuses on the need to prevent third-country residents from inappropriately obtaining the benefits of US income tax treaties, in particular by achieving inappropriate reductions in US withholding taxes. The study notes that in recent years interest payments have surged from foreign-controlled US corporations to related parties in countries that are a party to a US tax treaty with no "limitation on benefits" (LOB) provisions and that provides significant reductions in withholding rates. Such exploitation of those treaties without anti-treaty shopping protections confirms, according to the report, that: (1) the LOB provisions in other US agreements appear to provide significant deterrence against abuse, and (2) the Treasury Department must continue its ongoing efforts to revise treaties with no or inadequate LOB provisions.