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Loren Ponds Quoted on Prospects for Tax Legislation to Include Changes to Comply with OECD Deal in Law360

"Dems' Window Closing To Match OECD Deal Through BBB Act"


Loren Ponds discussed prospects for tax provisions contained in the Build Back Better Act (BBBA) reconciliation package, which include changes that would better align the U.S. international tax system with the global deal reached via talks led by the Organisation for Economic Co-operation and Development (OECD). However, the changes have only been supported by Democrats. If the BBBA falls apart, then "the calculus for enactment of any of the tax provisions included in the House-passed version of the bill is completely different," Ponds said. It remains unclear how Republicans may alter the legislation if they were involved. What is more clear, Ponds said, is that Republicans are unlikely to be "all in" on the policies that have been negotiated by the Biden administration at the OECD level. Ponds suggested that to optimize the likelihood of passage, the bill should again become the focus sometime in the first quarter of 2022 to allow lawmakers ample time to consider the package before they begin preparing for midterm elections in November.
Beyond the work on Pillar Two's minimum tax in the U.S., Ponds said she expects the exercise of implementing Pillar One to become more contentious as the framework becomes more crystallized. Some jurisdictions planning to implement the OECD deal will have digital services taxes on the books before Pillar One is implemented, such as Canada, which may pose political challenges, Ponds said. When considering the rules enshrined in the recently finalized foreign tax credit regulations in the U.S. if these digital services taxes proliferate, the conversation must include "the domestic issue presented by the fact that the [DSTs] are due, taxpayers are paying them, and they're not creditable," Ponds said.