GOP seeks to tax payments to foreign affiliates

The Tax Cuts and Jobs Act (H.R. 1) released Thursday includes a 20% excise tax on payments from U.S. corporations to foreign affiliates. The excise tax could impose substantial costs on pharmaceutical companies with global supply chains. Under the provision, payments other than interest made by a U.S. corporation to a related foreign corporation would be subject to the tax, “unless the related foreign corporation elected to treat the payments as income effectively connected with the conduct of a U.S. trade or business,” according to a House Ways & Means Committee summary of the bill. The provision would apply only to international financial reporting groups with payments from U.S. corporations to their foreign affiliates totaling at least $100 million annually.

The provision, according to the summary, “would eliminate the U.S. tax benefit afforded to multinational companies that make deductible payments between U.S. and foreign affiliates by imposing full U.S. tax on those profits irrespective of where they are booked.”...