Skip to Main Content
 

Peter Barnes Comments on BEAT Provision in Law360

February 22, 2018, Law360

A literal reading of one of the new international provisions in the recent federal tax overhaul could have the unintended consequence of encouraging U.S. companies to change their operations to avoid the harsh treatment, practitioners said.

Peter Barnes, a senior fellow at Duke University School of Law, also argued for playing it safe. [Mr. Barnes is also Of Counsel to Caplin & Drysdale’s International Tax and Tax Controversies practice groups.]

“There may be a break on the cost component, but that’s not the way the rule is written,” he said.

Barnes, a former tax executive with General Electric Co., said that the provision could cause U.S. multinationals to restructure their operations — and that some of those restructurings could hurt, rather than help, the U.S. overall. For example, he said, a company might decide to have a foreign affiliate that currently provides services or intangibles also provide the good.

If a U.S. company uses foreign-owned intellectual property to make pills in the U.S., the royalty for that IP is a base-eroding payment, Barnes noted. On the other hand, if the foreign entity that owns the IP makes the pills, “that’s not a base-eroding payment even though there’s an intangible component in there because they’re buying goods,” he said. This kind of restructuring is “an unintended but clearly foreseeable consequence of the BEAT.”

For the full article, please visit Law360’s website (subscription required).

Excerpt taken from the article “Tax Specialists Call for Generous Reading of BEAT Provision” by Molly Moses for Law360.

________________________________________________

About Caplin & Drysdale
Having celebrated our 50th Anniversary in 2014, Caplin & Drysdale continues to be a leading provider of legal services to corporations, individuals, and nonprofits throughout the United States and around the world. We are also privileged to serve as legal advisors to accounting firms, financial institutions, law firms, and other professional services organizations.

The firm's reputation over the years has earned us the trust and respect of clients, industry peers, and government agencies. Moreover, clients rely on our broad knowledge of the law and our keen insights into their business concerns and personal interests. Our lawyers' strong tactical and problem-solving skills -- combined with substantial experience handling a variety of complex, high stakes, matters in a boutique environment -- make us one the nation's most distinctive law firms.

With offices in New York City and Washington, D.C., Caplin & Drysdale's core practice areas include:
For more information, please visit us at www.caplindrysdale.com.
Washington, DC Office:
One Thomas Circle NW
Suite 1100
Washington, DC 20005
202.862.5000
New York, NY Office:
600 Lexington Avenue
21st Floor
New York, NY 10022
212.379.6000

___________________________

Disclaimer
This communication does not provide legal advice, nor does it create an attorney-client relationship with you or any other reader. If you require legal guidance in any specific situation, you should engage a qualified lawyer for that purpose. Prior results do not guarantee a similar outcome.

Attorney Advertising
It is possible that under the laws, rules, or regulations of certain jurisdictions, this may be construed as an advertisement or solicitation.
© 2018 Caplin & Drysdale, Chartered
All Rights Reserved.

Related Professionals

Related Practice Area(s)