Financing International Operations

Section 267(a)(3) remained in the Code unchanged from the Tax Reform Act of 1986 until amended by the American Jobs Creation Act of 2004 (the "AJCA"). It appears that the entire focus of the AJCA amendments to Code Sec 267(a)(3)(B) was with respect to accruals of amounts owed by taxable US...

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Bibliographic Details
Published in:International Tax Journal 2008-05, Vol.34 (3), p.13
Main Authors: Harter, L G "Chip", Lee, Rebecca E
Format: Article
Language:English
Subjects:
Business expenses
Controlled foreign corporations
Foreign source income
Foreign tax credits
Internal Revenue Code
Principles
Related parties
Stockholders
Tax deductions
Tax reform
Taxation
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Summary:Section 267(a)(3) remained in the Code unchanged from the Tax Reform Act of 1986 until amended by the American Jobs Creation Act of 2004 (the "AJCA"). It appears that the entire focus of the AJCA amendments to Code Sec 267(a)(3)(B) was with respect to accruals of amounts owed by taxable US persons to related CFCs. Little thought appears to have been given in the legislative process to how Code Sec 267(a)(3)(B) should apply to accruals of amounts owed by CFCs. Although they have received relatively little attention, the AJCA amendments to Code Sec 267(a)(3)(B) have potentially far reaching consequences for how US-based multinationals finance and conduct the businesses of their foreign subsidiaries. The Treasury and the IRS need to provide guidance with respect to several significant issues as to how Code Sec. 267(a)(3)(B) applies to accruals of otherwise deductible amounts owed to CFCs.