WASHINGTON – Rep. Ron Estes (R-Kansas), joined by Way and Means Committee Chairman Jason Smith (R-Missouri) and other colleagues, introduced the Unfair Tax Prevention Act to discourage foreign countries from attacking U.S. jobs and tax revenues through the Organization for Economic Co-operation and Development (OECD)’s Pillar 2 so-called Under Taxed Profit Rule (UTPR) surtax. Just this week, in a tacit acknowledgment that despite the Biden administration's negotiations, the U.S. is not on board with surrendering its sovereignty, its jobs, or its tax revenues, the OECD issued a delay in implementation of the UTPR. If a country moves forward with a UTPR surtax on American workers and businesses, the Unfair Tax Prevention Act imposes a reciprocal tax measure that will apply as long as the foreign country's unfair tax remains in place.
"After repeated objections from policymakers, including myself, and business leaders, the Biden administration has negotiated a deal with the OECD that has a disproportionately negative effect on the United States and our economic competitiveness," said Rep. Estes. "Building on the Defending American Jobs and Investment Act, introduced by Ways and Means Republicans, this legislation protects the U.S. tax base from unfair extraterritorial taxes by foreign countries – and imposes stiff penalties on those countries if they implement them. It's time for the OECD and foreign countries to abandon the UTPR surtax and its fundamental flaws."
"Congressional Republicans are not going to turn a blind eye to other countries – emboldened by the Biden administration's dangerous and misguided policies – targeting U.S. companies with higher taxes that will destroy U.S. jobs and steal U.S. revenues," said Ways and Means Committee Chairman Smith. "Nor will we allow foreign entities – including companies controlled by the Chinese Communist Party – to exploit those circumstances to gain an unfair competitive advantage against American workers and job creators. It is particularly shameful that the deal the Biden administration has cut at the OECD does nothing to hold China accountable or ensure it will not cheat under this new global tax scheme. This week's announcement by the OECD that it's delaying the deadline for implementation is a clear sign that other countries are realizing that while the Biden administration may be interested in colluding with them to raise taxes on American businesses, the Congress that actually writes tax law in our country is not on board. This legislation is the next and necessary step to defend American sovereignty and jobs from the Biden administration's global tax surrender."
Background on the Unfair Tax Prevention Act
The Unfair Tax Prevention Act defends Americans from unfair taxation by foreign countries with a reciprocal tax measure for any country that decides to target Americans under the guise of the OECD deal:
Defines “foreign-owned exterritorial tax regime entities” (FETR entities) as foreign-controlled entities connected with entities operating in jurisdictions with extraterritorial taxes aimed at U.S. business operations, including the UTPR surtax.
Strengthens anti-avoidance rules in the U.S. base erosion and anti-abuse tax (BEAT), by eliminating the 3% base erosion percentage floor and the $500 million gross receipts test for FETR entities.
Revokes the ability of FETR entities to disregard certain service payments and payments subject to withholding taxes, and treats 50% of cost of goods sold as a base erosion tax benefit.
Accelerates the scheduled BEAT rate increase and tax credit changes for FETR entities.