Tax Provisions Compel U.S. Multinationals to Review Existing Business Structures

On August 10, 2010, President Obama signed legislation that includes international tax provisions that may make it more difficult for some U.S. companies to repatriate earnings of foreign subsidiaries to the United States while maintaining their existing effective tax rate. This KPMG LLP Public Policy Alert provides an overview of key provisions impacting the foreign tax credit regime, considerations for responding in the near and longer term, and the need to accelerate the review of business structures and risk planning.

Companies should evaluate quickly these new rules to ascertain whether immediate remedial action would be appropriate. U.S.-based companies should discuss cash repatriation to the United States, assess the implications to offshore organization structures, and plan appropriate adjustments. These inquiries and activities may involve strategic business decisions that will require active oversight and consideration by corporate boards and executives.

Business executives and boards might also use these changes to ask whether they are receiving the information they need to oversee tax risk, risk appetite models, and the potential impact of the legislation on business strategies. The new tax provisions are potentially broad-reaching, and the consequences will be difficult to assess without appropriate data aggregation and reporting, oversight, and assessment processes.