In a fight against what he calls double taxation, Oklahoma Congressman Kevin Hern filed legislation this week to address unintended consequences of the final foreign tax credit regulations issued by the IRS and the Treasury Department in late 2021.
He introduced the Supply Chain Security Act to change the regulations because they risk subjecting U.S. multinational corporations to double taxation and discourage investment in crucial supply chain markets.
“U.S. multinational companies shouldn’t have to bear the burden of flawed FTC regulations that could discourage their ability to invest and harm their ability to compete in the Western Hemisphere,” said Rep. Hern.
“By allowing U.S. multinationals an election out of the FTC regulations, we can ensure that American businesses continue to play a vital role in developing economies. This will give affected nations enough time to align their tax laws with our shared goals, fostering a fair and competitive environment.”
Hern, a Republican from Tulsa, said the pandemic revealed vulnerabilities in the global supply chain and highlighted the importance of encouraging investment in emerging markets. He added that U.S. policy should focus on creating regional integration to strengthen the supply chain and address gaps exposed by the pandemic.
House Ways and Means Chairman Jason Smith said as he and other committee members traveled across the country, it was a complaint they heard from small business owners.
“The misguided regulation issued by President Biden’s Treasury Department would penalize companies that exit China and bring their supply chains closer to home. Representative Hern’s bill, the Supply Chain Security Act, provides needed relief to American businesses operating in the Western Hemisphere and reduces our dependence on China.”
The objective of the FTC regulations released on December 28, 2021, was to disallow foreign tax credits for discriminatory taxes, a goal that is generally supported. However, non-discriminatory taxes, particularly withholding taxes from non-US tax treaty nations in the Western hemisphere, were also affected by the FTC regulations.
Nations impacted by these regulations are working to amend their tax laws to accommodate U.S. investment and the new foreign tax credit regime. During this interim period of tax law changes, U.S. multinationals should not bear the burden.
U.S. foreign policy encourages multinationals to invest in developing countries, which is crucial for global competitiveness, national security, and trade. In the highly competitive global marketplace, emerging markets have the option to seek investments from other countries like China, potentially leading to missed opportunities for the US.
Source: Hern press release
