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Bill

HR 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.

119th Congress Introduced by Jeff Van Drew and 1 co-sponsor

HR 1911 amends tax rules to exempt U.S. payments to foreign related parties from base erosion classification if foreign tax rates are at least 15%, easing tax burdens.

Introduced in House
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WeVote Research Nonpartisan
Bill Summary · HR 1911

Summary of HR 1911: Amendment to the Internal Revenue Code

Bill Number: HR 1911
Introduced On: March 06, 2025
Status: Introduced in House
Sponsors: Thomas R. Suozzi, Jefferson Van Drew

Purpose and Intent

The primary purpose of HR 1911 is to amend the Internal Revenue Code of 1986 to modify the treatment of certain payments made to foreign related parties. Specifically, the bill aims to ensure that these payments are not classified as "base erosion payments" if they meet certain criteria regarding foreign income tax rates. This amendment is intended to provide clarity and potentially reduce the tax burden on U.S. taxpayers engaged in international business.

Key Provisions

The bill proposes the following significant changes to Section 59A of the Internal Revenue Code:

  1. Redesignation and New Subsection:

    • Subsection (i) is added, which outlines conditions under which payments to foreign related parties will not be treated as base erosion payments.

  2. Criteria for Exemption:

    • Payments will not be considered base erosion payments if:
      • The foreign recipient is subject to an effective foreign income tax rate of at least 15%.
      • The amount paid is also subject to an effective foreign income tax rate of at least 15%.

  3. Establishing Effective Tax Rates:

    • Taxpayers must demonstrate the effective rate of foreign income tax based on applicable financial statements, with adjustments for various items such as:
      • Excluded dividends
      • Net tax expenses
      • Asymmetric foreign currency gains or losses
      • Other items as determined by the Secretary of the Treasury.

  4. Definition of Foreign Income Taxes:

    • The term "foreign income taxes" includes any income, war profits, or excess profits taxes paid or accrued to foreign countries or U.S. possessions.

  5. Procedural Rules:

    • The bill allows the Secretary of the Treasury to establish procedures for determining effective tax rates and to implement rules to prevent tax avoidance or abuse, including recharacterization of transactions among related parties.

  6. Effective Date:

    • The amendments will apply to taxable years beginning after the enactment of the bill.

Impact

Who Would Be Affected?

  • U.S. Taxpayers: Businesses making payments to foreign related parties may benefit from reduced tax liabilities if they can demonstrate compliance with the new criteria.
  • Foreign Related Parties: Entities receiving payments from U.S. taxpayers may need to ensure they meet the specified foreign tax rate to avoid classification as base erosion payments.

Procedural Aspects

  • The bill was referred to the House Committee on Ways and Means on the same day it was introduced. Further legislative actions will determine its progression through Congress.

Conclusion

HR 1911 seeks to amend the Internal Revenue Code to provide clarity on the treatment of payments to foreign related parties, potentially easing the tax burden for U.S. businesses engaged in international transactions. By establishing specific criteria related to foreign tax rates, the bill aims to encourage compliance and reduce the risk of tax avoidance.

Compiled from official sources — confirm details with the bill’s official record.

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