JCT analyzes Obama administration proposals on intangibles, excess returns

Washington National Tax Services

The staff of the Joint Committee on Taxation (JCT) recently released its analysis of the revenue provisions in President Barack Obama's proposed fiscal year 2012 budget. Compared with its examination of the President's tax proposals last year, the staff's analysis of this year's budget reflects a more pragmatic stance regarding the proposals' effects on taxpayer behavior and also provides a more complex analysis and critique of recent court decisions in the transfer pricing area.

Transfer pricing issues and valuation of intangible transfers remain a high priority for the Obama Administration. Also, this year's JCT pamphlet reiterates that "[t]ransfer pricing issues are among the most significant faced by the IRS in its tax administration efforts." Two Obama Administration proposals discussed by the JCT are especially relevant for transfer pricing issues:

•The proposal to revise the definition of intangibles and to prescribe certain intangible valuation principles;
•The proposal to subject to current U.S. taxation "excess returns" of controlled foreign corporations (CFCs) that are attributable to a transfer of intellectual property offshore.

Both proposals would be effective in tax years beginning after December 31, 2011.



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