Peter Barnes and David Rosenbloom Discuss Impact of New International Tax System with Law360

Tax professionals both inside and outside the government are preparing for what will likely be one of their busiest years ever, as they try to navigate this new international tax system.

“I don't think there will be short-term changes, because I think people are going to say, I need to understand it,” said Peter Barnes, a former senior tax counsel at General Electric, now a professor at Duke University School of Law. [Mr. Barnes is also Of Counsel to Caplin & Drysdale’s International Tax Group.]

But some factors may require companies to take quick action. Foreign tax credits will no longer be pooled, but counted on an annual basis, Barnes noted — so companies will have less flexibility to even out their tax obligations.

Furthermore, companies will likely want to move quickly to respond to new rules limiting the deductibliity of interest within a corporate group, as it is not limited to new loans but includes debt that has already accrued.

“Companies are going to have to quickly, quickly get their arms around the interest limitations,” Barnes said.

. . .

David Rosenbloom, a professor at the New York University School of Law and a member of Caplin & Drysdale, Chtd.'s Washington office, said the legislation's treatment of foreign taxation indicated an “isolationist” bent.

“We're reverting about 100 years in terms of international comity and cooperation,” he said. “What form will that take? Who the heck knows? There will be some retaliatory measures, and there will be some countries who are going to deny deductions for FDII.”

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Excerpt taken from the article “International Tax Developments To Watch In 2018” by Alex M. Parker for Law360.