Loren Ponds Comments on Difficulties in Drafting SHIELD Legislation Without OECD Rates in Tax Notes

"BEAT's Under- and Overinclusiveness Led to Treasury Rebuff"

TAX NOTES

06.03.2021

Tax Member Loren Ponds weighs in on President Biden's SHIELD proposal during a discussion with Jose Murillo, U.S. Department of Treasury deputy assistant secretary for international tax affairs, on June 2 at the Texas Federal Tax Institute virtual conference. Ponds asked whether disallowed deductions would be subject to an ordering rule, to which Murillo responded that usually in such cases, the default would be pro rata application, but that the statute and regulations would provide a rule to potentially address "knock-on effects," especially related to foreign tax credits. Ponds said that mechanically, it would be difficult to draft legislation that incorporates a yet-to-be-agreed-on Organisation for Economic Co-operation and Development (OECD) rate for SHIELD. That would also require Congress to approve what is happening at the OECD, Ponds noted.