A Hitchhiker’s Guide to Outbound International Tax Reform

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In this article, we argue that although some U.S. international income tax reforms, such as limitations on earnings stripping, can be handled by targeted legislative action, broad reform of the U.S. international income tax system should take place only as part of a general revision of the U.S. corporate income tax. We further argue that U.S. international income tax reform should not lose revenue, should take fairness issues into account, and should discount the competitiveness and complexity arguments. We also explain that broad U.S. international income tax restructuring should eschew both an explicit territorial system and formulary apportionment (although either would be better than the current U.S. regime) and, instead, should revise the current, badly flawed, U.S. worldwide system into a real worldwide system by abolishing deferral and severely limiting cross-crediting. We recommend strengthening this real worldwide system by correcting flaws in the source rules, limiting earnings stripping, repealing the Section 911 exclusion, and expanding the Section 904(j) de minimis rule and making it mandatory.


18 Chap. L. Rev.

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Chapman Law Review



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