H.R.2423 - Unfair Tax Prevention Act (119th Congress)
Summary
H.R.2423, the "Unfair Tax Prevention Act," aims to amend the Internal Revenue Code of 1986, specifically targeting the base erosion and anti-abuse tax (BEAT). The bill focuses on modifying the application of BEAT with respect to certain entities connected to jurisdictions that have implemented an extraterritorial tax regime. It introduces special rules for foreign-owned extraterritorial tax regime entities, impacting how they are treated under BEAT regulations.
Expected Effects
The bill's enactment would alter the tax liabilities and compliance requirements for foreign-owned entities operating in jurisdictions with extraterritorial tax laws. These changes could disincentivize certain tax avoidance strategies. It may also lead to increased tax revenue from these entities.
Potential Benefits
- May level the playing field for domestic businesses by reducing the tax advantages of foreign-owned entities in extraterritorial tax jurisdictions.
- Could increase U.S. tax revenue by closing loopholes related to base erosion.
- May discourage the use of extraterritorial tax regimes that unfairly benefit certain corporations.
- Could simplify tax compliance for some businesses by clarifying the application of BEAT.
- Might incentivize foreign entities to restructure their operations to avoid being classified as extraterritorial tax regime entities.
Most Benefited Areas:
Potential Disadvantages
- Could increase the tax burden on foreign-owned entities, potentially leading to decreased investment in the U.S.
- May create complexity in tax law, requiring businesses to expend resources on compliance.
- Could face challenges in defining and identifying extraterritorial tax regimes.
- Might lead to retaliatory tax measures from other countries.
- The 50% cost of goods sold treatment as a base erosion tax benefit could disproportionately affect certain industries.
Constitutional Alignment
The bill falls under Congress's power to lay and collect taxes, duties, imposts, and excises, as outlined in Article I, Section 8, Clause 1 of the Constitution. The bill does not appear to infringe on any specific constitutional rights or protections. The constitutionality of specific provisions would depend on their precise application and interpretation by the courts.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).