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New Anti-Tax Haven Legislation Tabled In House

by Glen Shapiro, Tax-News.com, Washington

24 May 2010


Lloyd Doggett (D-Texas) has introduced a new piece of anti-tax haven legislation into the US House of Representatives. HR 5328, The International Tax Competitiveness Act, contains many clauses which Doggett has previously included in similar pieces of legislation which didn't make it to the statute book due to Republican resistance.

Doggett was one of the sponsors of the Stop Tax Haven Abuse Act, along with Senator Carl Levin. Although that law was not passed, much of it was incorporated in the the Foreign Account Tax Compliance Act of 2009 (HR 3933, S 1934), which became law as part of the Hiring Incentives to Restore Employment (HIRE) Act, changing the system of withholding on payments made to non-US persons.

The new law continues the process of addressing the broad goals set out in the Treasury Department's 2009 proposal ‘Leveling the Playing Field', of removing tax incentives for US companies to invest overseas; and curbing the use of offshore jurisdictions by both companies and wealthy individuals. These goals were one of the main planks of President Obama's 2010 budget.

Key clauses of the new law would:

  • tighten corporate residency rules to prevent corporations with a preponderance of US officers from basing themselves overseas;
  • make it much more difficult for corporations to receive income from IP assets in foreign (low-tax) jurisdictions;
  • repeal the 80% 'active income' provision;
  • repeal the 'boot-within-gain' rule which allows favorable tax treatment of dividends paid during corporate reorganizations.

Previous attempts to pass such clauses have met with fierce resistance from major business organizations and from Republicans in general. It is not clear that the new bill will meet with any more success than its predecessors.

TAGS: individuals | tax | investment | business | tax incentives | law | budget | offshore | legislation | dividends

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