Congress quietly narrows corporate tax rule, favoring multinationals
H.R. 1911 — To amend the Internal Revenue Code of 1986 to provide that certain payments to foreign related parties subject to sufficient foreign tax are not treated as base erosion payments. · Filed by Herbert Conaway (D-NJ) · 2 cosponsors · Introduced Mar 6, 2025 · Referred to committee
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What it does
This bill amends the tax code to exempt certain payments to foreign subsidiaries and related companies from the 'base erosion and anti-abuse tax' (BEAT) — a rule designed to prevent multinational corporations from shifting profits overseas to reduce U.S. taxes. Under this bill, if a foreign company receiving the payment is subject to at least a 15% foreign income tax rate, the payment is no longer counted as a 'base erosion payment' and escapes the BEAT. This directly benefits multinational corporations with foreign operations, particularly those in countries with moderate tax rates.
Why we flagged it
The bill's functional purpose is to reduce the tax burden on multinational corporations by narrowing the base erosion and anti-abuse tax. It does this by creating an exemption for payments to foreign related parties that meet a 15% foreign tax threshold, directly benefiting large corporations with international operations.
What the text implies
- The 15% foreign tax threshold aligns with the OECD global minimum tax agreement, but this bill may allow U.S. corporations to claim the exemption even when the foreign subsidiary's effective rate is artificially inflated through accounting adjustments (the bill permits adjustments for 'excluded dividends,' 'asymmetric foreign currency gains,' and other items determined by Treasury).
- The bill grants Treasury broad discretion to define 'effective rate' and 'applicable financial statements,' creating regulatory uncertainty and potential for future narrowing or expansion of the exemption without congressional action.
The full analysis lists 4 implications of this text.
Who stands to gain
multinational corporations; large pharmaceutical companies; technology companies with foreign subsidiaries