'Abusive Behaviour Where None Exists': U.S. Tax Rules Under Fire

Tax attorney Joshua Odintz was recently quoted in an International Tax Review article about proposed regulations from the U.S. Department of the Treasury and Internal Revenue Service (IRS) on corporate excise taxes and their negative effects on inbound companies. The regulations would provide guidance on the new 1 percent excise tax on repurchases of corporate stock made after Dec. 31, 2022. Mr. Odintz said he finds it surprising that the funding rule from Notice 2023-2 applies to foreign stock purchased between Jan. 1, 2023, and April 12, 2024.

"The [US] Treasury announced it was eliminating the funding rule and replacing it with a different test. Nevertheless, it retained the test," he commented.

Mr. Odintz also highlighted that many comments filed in response to the Notice 2023-2 funding rule "noted that this rule is irrebuttable and would apply to acquisitions of inventory from abroad, as well as cash pooling." He added that the funding rule goes well beyond "the perceived abuse [of] avoiding the U.S. excise tax."

READ: 'Abusive Behaviour Where None Exists': U.S. Tax Rules Under Fire (Subscription required)