Since this column last appeared in the March/April 2022 issue of Tax Executive, the major news has been the passage of the Inflation Reduction Act (IRA), which President Joe Biden signed into law on August 16.
As TEI members are by now well aware, the IRA included two major “revenue raisers” of importance to the business tax community: first, a new corporate alternative minimum tax (CAMT) of fifteen percent imposed on the “adjusted financial statement income” of “applicable corporations,” and, second, a one percent excise tax on the fair market value of net share repurchases by covered corporations.
The CAMT presents more pressing, unique, and relevant issues for TEI. Unlike the prior corporate alternative minimum tax repealed in 2017 by the Tax Cuts and Jobs Act, the CAMT’s income tax base begins with financial statement income under the relevant accounting standard. Other than the short-lived Business Untaxed Reported Profits adjustment from the 1980s, basing the US federal tax liability of business income is relatively unexplored ground for the Internal Revenue Service and the Treasury Department. TEI members, however, are uniquely situated to comment on the differences between income for financial statement purposes and income for US federal income tax purposes.
The CAMT was devised to address the concern that large businesses were reporting significant income for financial statement purposes while paying little or no federal income tax. The goal of resolving this imbalance is in tension with the many preferences, credits, and other pieces of legislation that distinguish between net income for US federal income tax purposes and net income for financial accounting purposes and that Congress has passed over the years in pursuit of other policy goals. Congress left it to the Treasury Department and the IRS to hash out the details of the CAMT, including balancing these competing policy goals. TEI has been and will be active in providing input to Treasury and the IRS on all aspects of the CAMT, particularly where it intersects with the financial accounting rules.
Advocacy Outside the United States
TEI has also been busy commenting on tax policy issues around the world. By the time this appears in print, our Canadian Income Tax and Canadian Commodity Tax committees will have held their annual liaison meetings, in person for the first time since 2019, with the Canada Revenue Agency and Department of Finance. The Canadian Income Tax Committee also submitted several sets of comments on Canadian legislation, including the proposed Canadian implementation of Pillar Two of the Organisation for Economic Co-operation and Development’s base erosion and profit-shifting project (better known as BEPS), a proposed mandatory disclosure regime, and potential changes to the Canadian general anti-avoidance rule (GAAR).
Over in Europe, the European Direct Tax Committee submitted several sets of comments to the European Commission on various proposed tax directives. These included comments regarding potential directives on a debt-equity bias reduction allowance, the role of enablers in aggressive tax planning and tax evasion, and a common European Union–wide system for withholding taxes on interest and dividend payments.
As you’re aware, TEI has opportunities to advocate for good tax policy and administration across the globe, and the above developments represent just a sampling of the issues for which TEI has submitted comments since the last appearance of this column. In the immediate future, the Institute hopes to renew its annual in-person liaison meetings with the IRS and the US Treasury Office of Tax Policy, especially as the implementation of the CAMT, the one percent excise tax on stock buybacks, and other administrative and policy issues take on importance to TEI members.
If you have yet to read TEI’s comments on these and other issues, I invite you to do so by visiting www.tei.org/advocacy/submissions. If you like what you see and want to get involved, please let me know. Active member participation is the lifeblood of TEI advocacy.
Ben Shreck is tax counsel for TEI in Washington, D.C., where he supports the advocacy activities of the Institute’s Tax Reform Task Force and its US International Tax, European Direct, Canadian Commodity Tax, and Canadian Income Tax committees. TEI members interested in joining—or proposing—an Institute-level advocacy project may contact him at bshreck@tei.org.
