Cross-border Tax Talks

The IRA and Book Minimum Tax: Not a Pillar Two Podcast

Doug McHoney (PwC's International Tax Services Global Leader) is joined by Aaron Junge in Westminster Studios. Aaron is International Tax Partner in PwC’s Washington’s National Tax Services and was previously Tax Counsel in the House Ways and Means Committee during the Tax Cuts and Jobs Act implementation. Doug and Aaron discuss the corporate alternative minimum tax (also called the ‘Book Minimum Tax’) and other Inflation Reduction Act tax provisions, which President Biden signed into law on August 16. More specifically, they cover the BMT effective date and its scope, what are applicable corporations, changes to the aggregation rules, what is applicable financial statement income, common adjustments, calculating the AMT foreign tax credit, and what guidance we might see from Treasury.

Timestamps:

• 3:05 - The Inflation Reduction Act contains tax, energy, and healthcare provisions that arose from the ashes of the proposed Build Back Better reconciliation bill. What are some of the key tax provisions from the Inflation Reduction Act?
• 5:25 - What should we call this new tax? BMT? AMT?
• 6:30 - Is this the US version of the Pillar Two rule?
• 8:30 - When is it effective?
• 9:15 - What companies are affected by this? What are applicable corporations?
• 11:45 - One of the issues that came up during Senate negotiations were the kinds of companies the BMT affected, including whether this would eventually impact Private Equity companies, whether you would test at the fund level or the portfolio company level. What were some changes to the aggregation rules?
• 15:25 - What is “Adjusted Financial Statement Income”?
• 17:30 - Let’s talk about some of these “common adjustments', specifically accelerated depreciation. From a tax perspective, how could this adjustment put some companies in the BMT soup?
• 20:15 - How is this calculation done with disregarded entities and CFCs?
• 23:05 - How are pension benefits defined?
• 24:00 - What happens when we have financial Statement losses at the consolidated parents level, or the CFC level?
• 27:15 - Once we’ve done these calculations, how do we determine if a company is actually paying this BMT tax?
• 30:00 - How do you calculate the AMT foreign tax credit?
• 33:30 - Is this really just a big timing difference?
• 38:40 - There’s a concept of colloquy during the legislative process. What is colloquy and what does it mean for tax?
• 42:45 - There seems to be a trend where Congress gives a lot of authority to Treasury to write regulations. What should we be mindful of for the BMT?
• 45:00 - What other advice can be given for companies as we think about BMT, the 1% excise tax, and other corporate tax changes?

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