Law360 Quotes Peter Barnes and David Rosenbloom on International Interest Deductions in Tax Bill

As tax writers work to align the tax reform bills passed in both houses of Congress, tax specialists predicted the Senate version’s international tax provisions would prevail over those in the House bill in most instances, but suggested the final version of the limit on interest deductions from international group members was harder to predict.

“My assumption is that the House will go out of its way to accept as much of the Senate bill as it can because the Senate is a more fragile institution with the Republican majority,” said David Rosenbloom of Caplin & Drysdale in Washington. “I don’t think they’re going to fight about things that would go back to the Senate.”

. . .

“Trying to figure what is base return, a routine return, versus a high return is a fool’s errand, particularly because returns vary, depending on things like inflation,” said Peter Barnes, a senior fellow at Duke University School of Law and a former tax executive with General Electric Co. Barnes also said the GILTI provision and others in the legislation “are terribly difficult for taxpayers to administer and for the government to audit.” How, he asked, will accounting firms ask their clients to “feed in data to calculate the GILTI?” [Mr. Barnes is also Of Counsel to Caplin & Drysdale’s International Tax Group.]

Barnes predicted that further revisions would be needed to any GILTI provision that goes into the final bill — perhaps for years, as was the case with the foreign tax credit and Subpart F changes in the 1986 tax reform legislation.

“For a decade, additional legislation was considered and enacted to smooth the edges of the initial legislation,” he said. “Whatever provision comes out is going to lead to several years of massaging.”

Rosenbloom, for his part, worried that foreign tax authorities would push back against the deduction for GILTI. For “this so-called patent box, other countries are probably not going to give a deduction for those expenses,” he said.

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Excerpt taken from the article “Outcome Cloudy On Int'l Interest Deductions In Tax Bill” by Molly Moses for Law360.