Unfair Tax Prevention Act
The Unfair Tax Prevention Act would change how the base erosion and anti-abuse tax (BEAT) applies to a new category of entities called "foreign-owned extraterritorial tax regime entities." These are entities that are controlled by foreign entities and face extraterritorial taxes in foreign jurisdictions—taxes determined by ownership chains rather than straightforward ownership or location. Under the bill, these entities would be treated specially within BEAT, with specific changes to how their BEAT status is determined, when the BEAT rules apply, and how much of their costs (specifically, cost of goods sold) count as BEAT-related deductions. The amendment would apply to taxable years beginning after the date of enactment. In short, the bill tightens BEAT rules for certain foreign-controlled entities operating in other countries and expands how their taxes are treated for BEAT purposes.
Key Points
- 1Establishes a new category: foreign-owned extraterritorial tax regime entities, and provides special BEAT rules for them.
- 2Defines extrathetical tax regime and related terms to cover foreign taxes imposed on a chain-of-ownership basis, not tied to direct ownership interests.
- 3For these entities, they are treated as applicable BEAT taxpayers and certain BEAT calculation rules are altered.
- 4The date used for BEAT applicability is replaced with the date of enactment of subsection (i) rather than December 31, 2025.
- 5The bill adds a 50% rule: 50% of the entity’s cost of goods sold is treated as a base erosion tax benefit with respect to a BEAT base erosion payment.
- 6Effective date: the changes apply to taxable years beginning after the date of enactment.